IMAGE SOURCE:robertbonnett.com1. Explain what Islamic Banking is and its background.
Islamic banking is banking based on Islamic law (Shariah). It follows the Islamic rules and practices on transactions which come from the Quran and the Sunnah, and other secondary sources of Islamic law such as opinions collectively agreed among Shariah scholars (ijma’), analogy (qiyas) and personal reasoning (ijtihad). 1
2. What are the key principles of Islamic banking?
Islamic Banking is based on the principles of trade, partnership, sharing of gains and losses, and prohibition of out of control risk. It prohibits:
· Interest-based banking
· Gharar –unclear contracts
· Maysir–speculation
· Financing of haram transactions (alcohol, gambling, pork, etc.)2
Islamic Banking is based on the principles of trade, partnership, sharing of gains and losses, and prohibition of out of control risk. It prohibits:
· Interest-based banking
· Gharar –unclear contracts
· Maysir–speculation
· Financing of haram transactions (alcohol, gambling, pork, etc.)2
3. Islamic law forbids institutions from charging interests on loans. How do they make profits when lending money?
Banks can profit from the buying and selling of approved goods and services. The principal means of Islamic finance are based on trading, and it is essential that risk be involved in any trading activity, so banks and financial institutions will trade in sharia-compliant investments with the money deposited by customers, sharing the risks, and the profits between them.
Although they cannot charge interest, the banks can profit from helping customers to purchase a property using ijara (leasing) or murabaha (sale on agreed upon profit) scheme. With an ijara scheme the bank makes money by charging the customer rent; with a murabaha scheme, a price is agreed at the outset which is more than the market value. This profit is deemed to be a reward for the risk that is assumed by the bank.
4. Explain the concept of ethical investments under Islamic law. Who is to determine whether an activity is allowed or not?
There are firm laws governing the types of business the banks can trade with. There should be absolutely no investment in unsuitable businesses, including those involved with armaments, pork, tobacco, drugs, alcohol or pornography.
IMAGE SOURCE:worldpoliticsreview.com
5. How does Islamic banking influence the economy in the Middle East?
The steady expansion of Islamic banks has been the hallmark of the Middle East financial landscape in the 1980s and 1990s. With a network that spans more than 60 countries and an asset base of more than $200 billion, Islamic banks are now playing an increasingly significant role in their respective markets. To this end, Islamic banks are rapidly gaining market shares in their domestic economies and their presence in highly sophisticated markets exemplifies the empirical success of the viability of eliminating fixed interest payments from financial transactions. Indeed, consolidation among banks, rising competition and continuous innovation
to provide financial services, all contribute to a growing interest in a detailed
critical evaluation of Islamic banks.
Islamic banks have the flexibility of becoming shareholders and creditors of firms, as well as the advantage of providing investment-banking services3 all this sums to attrack foreing direct investment to Middle East and foster its economy.
6. Based on your research and knowledge about this topic, what is the future of Islamic Banking in terms of global expansion and growth?
Even though the Islamic banking industry is relatively new compared to the conventional banking, Introduced 30 years ago, it was operating in a limited number of Muslim countries. Three decades ago, Islamic banking was targeting and planning to serve only Muslim clients keen to deal only on Shariah compliant base.
After this research I must say that the future of Islamic Banking is really promising,
Peolple perceived a banking concept based on transparency, win-win relationship and Ethical banking values and services, making them worth trustful.
Even though the Islamic banking industry is relatively new compared to the conventional banking, Introduced 30 years ago, it was operating in a limited number of Muslim countries. Three decades ago, Islamic banking was targeting and planning to serve only Muslim clients keen to deal only on Shariah compliant base.
After this research I must say that the future of Islamic Banking is really promising,
Peolple perceived a banking concept based on transparency, win-win relationship and Ethical banking values and services, making them worth trustful.
VIDEO: http://www.videocrux.com/video/12920/Islamic-banks-show-growth-during-recession
1. http://www.bankinginfo.com.my/_system/media/downloadables/islamic_banking.pdf
2. http://www.nzibo.com/islamic.html 3.http://www.irti.org/irj/go/km/docs/documents/IDBDevelopments/Internet/English/IRTI/CM/downloads/IES_Articles/Vol%2011-1..A%20H%20Bashsir..Determinants%20of%20Profitability..dp.pdf
http://www.worldfinance.com/news/world-market/islamicfinance/article216.html
http://www.guardian.co.uk/money/2006/jun/13/accounts.islamicfinance
http://www.islamic-banking.com/islamic_banking_principle.aspx
No hay comentarios:
Publicar un comentario