Islamic Banks - Make Money

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Islamic banking is also by no means a recent phenomenon. The basic practices can be traced back to the early parts of the seventh century. Some specialists even claim that lots of of the ideas and techniques so familiar to us today were later adopted by European bankers. Its recent reemergence coincided with rising oil prices in the mid 1970s thus providing parts of the Muslim world with significant financial resources. The other crucial element was the accompanying search for ethical values in managing their financial affairs, something lots of of the historicallyin the past western financial organisations could not provide. As this is a trend not only applicable to the Muslim world, the emerging Islamic banks are increasingly being accepted by non-Muslims who do not require to invest in, or even deposit their savings with companies engaged in unethical and socially harmful activities, such as dealing in alcohol, betting, pornography and tobacco.

islamic bank of britain

To recap, of the basic principles of Islamic banking is the prohibition of riba (usury or interest). Up until the 1980s riba was usually interpreted to only apply to usury but it is now accepted practice to refer to all interest. Other principles are based on simple morality and common sense, which are by no means unique to Islam. For example, usury was also prohibited by the Elderly as well as the New Testament. Even literary heavyweights such as Shakespeare weighed in against the practice.

islamic bank of britain

The Islamic economic process is concerned with social justice to be definite that not of the parties involved in a transaction is being exploited without simultaneously inhibiting individual enterprise. Extended to the Islamic financial process, this means that the funds individuals and/or companies put in danger share the profits or losses resulting from the enterprise. This idea of sharing the delights or pain of the finish result of business is a progressive. To paraphrase Charles Darwin "It is not the strongest financial process that survives, nor the most clever. It is the that is most adaptable to modify." Islamic banking encourages better resources management, in particular as outright speculation is not allowed by Shariah, ie Islamic law. The participants are keeping pace with sophisticated techniques and have developed products that are not only ethically motivated but also profitable.

Islamic financial solutions usually have Arabic names thus intimidating lots of potential buyers in to saying it is all complicated. At their core, most of these products are fundamentally the same as their conventional equivalents. The main differences are the absence of interest and often complicated procedures to be definite compliance with Shariah law.

For example, in Islamic housing finance the risks involved are shared between the bank and the borrower, than transferring all the risk to the latter. The most often used contract is the diminishing musharaka (partnership) contract. In this case the bank and the borrower form a partnership, with the bank providing up to 95 percent of the acquisition cost, and the borrower five percent.



islamic bank of britain