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Islamic Banking

ISLAMIC BANKING
STEP TOWARDS A RIBA/ INTEREST FREE BANKING SYSTEM

Term report

PHILOSOPHY OF ISLAM
INSTRUCTOR: A. W. Qureshi

BBA VI/III

GROUP MEMBERS:
Amna Atiq
Maimoona Tariq
Midhat Fatima Rizvi
Moiz Ali Khan

15th April 2009


Table of Contents

INTRODUCTION 2
Riba 3
Interest 3
Profit 3
Riba Al Nassieal 4
Riba Al Efadal 4
Disadvantages of Riba 6
COMPARISON WITH OTHER COUNTRIES 8
Malaysia 8
Bahrain 10
Indonesia 10
Turkey 11
Pakistan 11
INSTRUMENTS OF ISLAMIC BANKING 15
Mudarba 15
Musharka 15
Ijara 16
Bai Salam 16
Istisna 17
Bay ul Urboon 17
Sukkuk 18
Murabahak 19
Qarz-e-Hassan 19
Musawamah 19
Wadia (safekeeping) 20
ARGUMENTS IN FAVOR OF ISLAMIC BANKING 21
PROBLEMS WITH ISLAMIC BANKING 24
SWOT ANALYSIS 30
RECOMMENDATIONS 31
FUTURE PROSPECTS OF ISLAMIC BANKING 33
END NOTES AND REFERENCES 34
INTRODUCTION
Muslims consider and accept Islam as Deen (Lifestyle) instead of taking it as a religion. We, as Muslims, are extra careful about fulfilling the injunctions of Islam, in particular, the categorization of goods and services as Halal (permitted) and Haram (prohibited). Almighty Allah has clearly defined the use of goods and services that are for the betterment of humanity and prohibition of anything that is harmful and creates instability and injustice to human life.
The Islamic economic system is based upon a set of principles found in the Quran. No matter what feature of the Islamic financial array is introduced, for functioning it has to support itself on the Quranic model of social justice. The Islamic financial system, consequently, cannot be introduced merely by eliminating riba but also by implementing the Islamic principles of social justice and introducing laws, practices, procedures and instruments which help in the preservation and allowance of justice, equity and fairness. Hence, the goals of Islamic economic system are: economic well-being within the framework of Islamic moral values; universal...