Islamic banking refers to a system of banking that complies with Islamic law also known as Shariah law. The Sharia’ah principles are those rules and injunctions that are derived from Qur’an, Hadith, Ijma and other sources which involves exercise of intelligence and reasoning based on interpretations. The underlying principles that govern Islamic banking are mutual risk and profit sharing between parties, the assurance of fairness for all and that transactions are based on an underlying business activity or asset. These principles are supported by Islamic banking’s core values whereby activities that cultivate entrepreneurship, trade and commerce and bring societal development or benefit is encouraged. Activities that involve interest (riba), gambling (maisir) and speculative trading (gharar) are prohibited.Through the use of various Islamic finance concepts such as ijarah (leasing), mudharabah (profit sharing), musyarakah (partnership), financial institutions have a great deal of flexibility, creativity and choice in the creation of Islamic finance products. Furthermore, by emphasising the need for transactions to be supported by genuine trade or business related activities, Islamic banking sets a higher standard for investments and promotes greater accountability and risk mitigation.
There are over 300 Islamic financial institutions worldwide across 75 countries According to the Asian Banker Research Group, The World’s 100 largest Islamic banks have set an annual asset growth rate of 26.7%2 and the global Islamic Finance industry is experiencing average growth of 15-20% annually.3Malaysia’s Islamic finance industry has been in existence for over 30 years. The enactment of the Islamic Banking Act 1983 enabled the country’s first Islamic Bank to be established and thereafter, with the liberalisation of the Islamic financial system, more Islamic financial institutions have been established
Best services for writing your paper according to Trustpilot
