Islamic banking and finance

Islamic banking refers to a system of banking or banking activity that is consistent with the principles of Islamic law ( Sharia ) and its practical application through the development of Islamic economics . Sharia prohibits the payment or acceptance of interest fees for the lending and accepting of money respectively, ( Riba , usury ) for specific terms, as well as investing in businesses that provide goods or services considered contrary to its principles ( Haraam , forbidden). While these principles were used as the basis for a flourishing economy in earlier times, it is only in the late 20th century that a number of Islamic banks were formed to apply these principles to private or semi-private commercial institutions within the Muslim community.

Funds transfer Cheque Card Electronic Bill payment Instant payment Mobile Wire RTGS NS Direct debit ACH Giro SWIFT Correspondent account CLS CIPS SPFS BRICS PAY Terms Related topics Asset pricing Bond (finance) Capital structure Corporate finance Cost of capital Equity (finance) Ethical banking Exchange-traded fund Financial law market participants regulation risk system History of banking List of banks Market risk Personal finance Public finance Security (finance) Shares Sustainable Development Goals Systematic risk Systemic risk Time value of money Too big to fail Too connected to fail Watered stock Category Commons Portal v t e Islamic banking ( , ) is banking or banking activity that is consistent with the principles of sharia and its practical application through the development of Islamic economics . As such, a more correct term for 'Islamic banking' is 'Sharia compliant finance'. Sharia prohibits acceptance of specific interest or fees for loans of money (known as riba , or usury ), whether the payment is fixed or floating. Investment in businesses that provide goods or services considered contrary to Islamic principles (e.g. pork or alcohol) is also haraam ("sinful and prohibited"). Although these prohibitions have been applied historically in varying degrees in Muslim countries/communities to prevent unIslamic practices, only in the late 20th century were a number of Islamic banks formed to apply these principles to private or semi-private commercial institutions within the Muslim community. As of 2014, sharia compliant financial institutions represented approximately 1% of total world assets. By 2009, there were over 300 banks and 250 mutual funds around the world complying with Islamic principles and as of 2014 total assets of around $2 trillion were sharia-compliant. According to Ernst & Young , although Islamic Banking still makes up only a fraction of the banking assets of Muslims, it has been growing faster than banking assets as a whole, growing at an annual rate of 17.6% between 2009 and 2013, and will grow by an average of 19.7% a year to 2018. Even in countries where Islamic banking has a strong foothold, such as the Gulf states and in South East Asia, its share rarely accounts for more than one third of the market. In Indonesia, the world's most populous Muslim country, Islamic banking currently has less than 5% market share.

Funds transfer Cheque Card Electronic Bill payment Instant payment Mobile Wire RTGS NS Direct debit ACH Giro SWIFT Correspondent account CLS CIPS SPFS BRICS PAY Terms Related topics Asset pricing Bond (finance) Capital structure Corporate finance Cost of capital Equity (finance) Ethical banking Exchange-traded fund Financial law market participants regulation risk system History of banking List of banks Market risk Personal finance Public finance Security (finance) Shares Sustainable Development Goals Systematic risk Systemic risk Time value of money Too big to fail Too connected to fail Watered stock Category Commons Portal v t e Islamic banking or Islamic finance ( ) or sharia-compliant finance is banking or financing activity that complies with sharia (Islamic law) and its practical application through the development of Islamic economics . Some of the modes of Islamic banking/finance include Mudarabah (profit-sharing and loss-bearing), Wadiah (safekeeping), Musharaka (joint venture), Murabahah (cost-plus), and Ijara ( leasing ). The Qur'an prohibits riba , which literally means "increase". Technically riba is the increase when liquid or fungible assets (cash, debt, grains, etc.) are exchanged other than at par value. The most prevalent example in today's economy is lending money at interest, for example an exchange of $100 cash now for $110 payable in a year's time, an increase of $10. (Some Muslims dispute whether there is a consensus that interest is equivalent to riba ). Investment in businesses that provide goods or services considered contrary to Islamic principles (e.g. pork or alcohol) is also haraam ("sinful and prohibited"). These prohibitions have been applied historically in varying degrees in Muslim countries/communities to prevent un-Islamic practices. In the late 20th century, as part of the revival of Islamic identity, a number of Islamic banks formed to apply these principles to private or semi-private commercial institutions within the Muslim community. Their number and size has grown, so that by 2009, there were over 300 banks and 250 mutual funds around the world complying with Islamic principles, and around $2 trillion was sharia-compliant by 2014. Sharia-compliant financial institutions represented approximately 1% of total world assets, concentrated in the Gulf Cooperation Council (GCC) countries, Iran, and Malaysia. Although Islamic banking still makes up only a fraction of the banking assets of Muslims, since its inception it has been growing faster than banking assets as a whole, and is projected to continue to do so. The industry has been lauded for returning to the path of "divine guidance" in rejecting the "political and economic dominance" of the West, and noted as the "most visible mark" of Islamic revivalism, its most enthusiastic advocates promise "no inflation, no unemployment, no exploitation and no poverty" once it is fully implemented. However, it has also been criticized for failing to develop profit and loss sharing or more ethical modes of investment promised by early promoters, and instead selling banking products that "comply with the formal requirements of Islamic law", but use "ruses and subterfuges to conceal interest", and entail "higher costs, bigger risks" than conventional ( ribawi ) banks. Even in countries where Islamic banking has a strong foothold, such as the Gulf states and in South East Asia, its share rarely accounts for more than one third of the market. In Indonesia, the world's most populous Muslim country, Islamic banking currently has less than 5% market share. Vision table: Questions and answers session. In Proceedings of the First Pakistan Islamic Banking and Money Market Conference , 14–15 September, Karachi Fadel, Mohammad. 2008. Riba , efficiency, and prudential regulation: Preliminary thought.

Financial activities compliant with Islamic law Funds transfer Cheque Card Electronic Bill payment Instant payment Mobile Wire RTGS NS Direct debit ACH Giro SWIFT Correspondent account CLS CIPS SPFS BRICS PAY Terms Related topics Asset pricing Bond (finance) Capital structure Corporate finance Cost of capital Equity (finance) Ethical banking Exchange-traded fund Financial law market participants regulation risk system History of banking List of banks Market risk Personal finance Public finance Security (finance) Shares Sustainable Development Goals Systematic risk Systemic risk Time value of money Too big to fail Too connected to fail Watered stock Category Commons Portal v t e Islamic banking , Islamic finance ( masrifiyya 'islamia ), or Sharia-compliant finance is banking or financing activity that complies with Sharia (Islamic law) and its practical application through the development of Islamic economics . Some of the modes of Islamic banking/finance include Mudarabah (profit-sharing and loss-bearing), Wadiah (safekeeping), Musharaka (joint venture), Murabahah (cost-plus), and Ijara ( leasing ). Sharia prohibits riba , or usury , defined as interest paid on all loans of money (although some Muslims dispute whether there is a consensus that interest is equivalent to riba ). Investment in businesses that provide goods or services considered contrary to Islamic principles (e.g. pork or alcohol) is also haram ("sinful and prohibited"). These prohibitions have been applied historically in varying degrees in Muslim countries/communities to prevent un-Islamic practices. In the late 20th century, as part of the revival of Islamic identity, a number of Islamic banks formed to apply these principles to private or semi-private commercial institutions within the Muslim community. Their number and size has grown, so that by 2009, there were over 300 banks and 250 mutual funds around the world complying with Islamic principles, and around $2 trillion was Sharia-compliant by 2014. Sharia-compliant financial institutions represented approximately 1% of total world assets, concentrated in the Gulf Cooperation Council (GCC) countries, Bangladesh , Pakistan , Iran , and Malaysia . Although Islamic banking still makes up only a fraction of the banking assets of Muslims, since its inception it has been growing faster than banking assets as a whole, and is projected to continue to do so. The industry has been lauded for returning to the path of "divine guidance" in rejecting the "political and economic dominance" of the West, and noted as the "most visible mark" of Islamic revivalism, its most enthusiastic advocates promise "no inflation, no unemployment, no exploitation and no poverty" once it is fully implemented. However, it has also been criticized for failing to develop profit and loss sharing or more ethical modes of investment promised by early promoters, and instead selling banking products that "comply with the formal requirements of Islamic law", but use "ruses and subterfuges to conceal interest", and entail "higher costs, bigger risks" than conventional ( ribawi ) banks. Even in countries where Islamic banking has a strong foothold, such as the Gulf states and in South East Asia, its share rarely accounts for more than one third of the market. In Indonesia, the world's most populous Muslim country, Islamic banking currently has less than 5% market share. Vision table: Questions and answers session. In Proceedings of the First Pakistan Islamic Banking and Money Market Conference , 14–15 September, Karachi Fadel, Mohammad. 2008. Riba , efficiency, and prudential regulation: Preliminary thought. There are <ref group=Note> tags on this page, but the references will not show without a template (see the help page ).

Financial activities compliant with Islamic law Funds transfer Cheque Card Electronic Bill payment Instant payment Mobile Wire RTGS NS Direct debit ACH Giro SWIFT Correspondent account CLS CIPS SPFS BRICS PAY Terms Related topics Asset pricing Bond (finance) Capital structure Corporate finance Cost of capital Equity (finance) Ethical banking Exchange-traded fund Financial law market participants regulation risk system History of banking List of banks Market risk Personal finance Public finance Security (finance) Shares Sustainable Development Goals Systematic risk Systemic risk Time value of money Too big to fail Too connected to fail Watered stock Category Commons Portal v t e Dubai Islamic Bank Islamic banking , Islamic finance ( Arabic : مصرفية إسلامية masrifiyya 'islamia ), or Sharia-compliant finance is banking or financing activity that complies with Sharia (Islamic law) and its practical application through the development of Islamic economics . Some of the modes of Islamic finance include mudarabah (profit-sharing and loss-bearing), wadiah (safekeeping), musharaka (joint venture), murabahah (cost-plus), and ijarah ( leasing ). Sharia prohibits riba , or usury , generally defined as interest paid on all loans of money (although some Muslims dispute whether there is a consensus that interest is equivalent to riba ). Investment in businesses that provide goods or services considered contrary to Islamic principles (e.g. pork or alcohol) is also haram ("sinful and prohibited"). These prohibitions have been applied historically in varying degrees in Muslim countries/communities to prevent un-Islamic practices. In the late 20th century, as part of the revival of Islamic identity, a number of Islamic banks formed to apply these principles to private or semi-private commercial institutions within the Muslim community. Their number and size has grown, so that by 2009, there were over 300 banks and 250 mutual funds around the world complying with Islamic principles, and around $2 trillion was Sharia-compliant by 2014. Sharia-compliant financial institutions represented approximately 1% of total world assets, concentrated in the Gulf Cooperation Council (GCC) countries, Bangladesh , Pakistan , Iran , and Malaysia . Although Islamic banking still makes up only a fraction of the banking assets of Muslims, since its inception it has been growing faster than banking assets as a whole, and is projected to continue to do so. The Islamic banking industry has been lauded by the Muslim community for returning to the path of "divine guidance" in rejecting the "political and economic dominance" of the West, and noted as the "most visible mark" of Islamic revivalism; its most enthusiastic advocates promise "no inflation, no unemployment, no exploitation and no poverty" once it is fully implemented. However, it has also been criticized for failing to develop profit and loss sharing or more ethical modes of investment promised by early promoters, and instead merely selling banking products that "comply with the formal requirements of Islamic law", but use "ruses and subterfuges to conceal interest", and entail "higher costs, bigger risks" than conventional ( ribawi ) banks. Even in countries where Islamic banking has a strong foothold, such as the Gulf states and in South East Asia, its share rarely accounts for more than one third of the market. In Indonesia, the world's most populous Muslim country, Islamic banking currently has less than 5% market share. Vision table: Questions and answers session. In Proceedings of the First Pakistan Islamic Banking and Money Market Conference , 14–15 September, Karachi Fadel, Mohammad. 2008. Riba , efficiency, and prudential regulation: Preliminary thought. There are <ref group=Note> tags on this page, but the references will not show without a template (see the help page ).