Haven't you always wondered what "Islamic Banking” was all about? Or, like most people, did you believe that it was a banking system of Muslims, by Muslims, and solely for Muslims? Well, read on and you will see why, for an ever-increasing number of people today, nothing could be further from the truth. And why, irrespective of their religion or faith, more and more people are turning to the virtues of Islamic banking.
The principles of Islamic Banking and financial inclusion through incorporation of Sharia-law principles into conventional banking.
Why was Islamic Banking established?
Since the beginning of the 18th century, banking has been conducted on an interest-based system of lending money to those in need. With no other alternative available, people had no choice but to borrow money at often high interest rates. This lead to the formation of an unfair system that brought unnecessary hardship on people.
It was this need for a fair financial system that brought about the birth of Islamic banking in the mid 1970s. Its objective was to provide a financial alternative that was fair, transparent and above all, a source of economic upliftment for all those in need.
Islamic banking, enlightened with the guidance of Islamic Sharia principles, emerged as an alternative financial system that neither gave nor took interest, thereby introducing a fair system of social justice and equality, while fulfilling the financial needs of people and maintaining high standards of ethics, transparency and a sense of responsibility.
No interest! Is that the only interesting thing about Islamic Banking?
If you thought that Islamic banking and conventional banking are two sides of the same coin or if you believed there can be no banking without interest, we welcome you to the amazing world of Islamic banking, where interest does not play any role.
A banking system in which millions around the world, irrespective of religious beliefs, are putting their faith in.
A banking system to which even the world’s leading conventional banks are turning to.
A banking system which is governed by a resilient code of ethics in all its practices and functions.
And, a banking system where ‘no interest’ is just one of the many aspects you’ll find interesting to follow for your own benefit.
What makes Islamic banking unique?
Rather than opting for interest as a way of generating wealth, Islamic banking is unique in the way that it helps individuals as well as businesses build tangible and appreciating assets for themselves. This not only leads to prosperity founded on a solid economic base, but also encourages the spirit of entrepreneurship amongst its customers. Islamic banks are based on the unique concept of profit and loss sharing with the customers by way of various Sharia-compliant financing and investment tools.
Islamic banks provide an opportunity to the individuals and the businesses to build various assets which contribute to the development of the economy. Apart from this, the Islamic banks encourage the investment process through adopting innovative Sharia structures in all spheres of the economy, except in a few activities which are considered unethical.
Due to their very nature of complying with the Sharia principles, the Islamic banks are forbidden from indulging in any such practice, which may prove harmful to a customer.
Islamic banking is also the first where a customer, whether individual or corporate, isn't just a customer, but is a partner with the bank or owner of goods or assets. This means they share the risks, as well as the profits of such a partnership or ownership. And this unique arrangement is done in accordance with the principles of Sharia, which ensures complete transparency at all times.
Islamic banking therefore offers a portfolio of innovative, Sharia-compliant financial models that formalize this unique arrangement between customers and the bank. These are Murabaha, Musharaka, Mudaraba, Istisna, Salam and Ijara, to name a few.
And last but not least, Islamic banking is perhaps the only financial system to forbid the use of its finances or services for misleading, dishonorable, immoral and other purposes that would be harmful to society.
All our financial products and services are regulated by Islamic Banking principles and are periodically reviewed and approved by our Internal Shariah Supervision Committee, ensuring activities are Shariah compliant and periodic Shariah audits are carried out as well. Furthermore, our activities as Islamic bank are regulated by Higher Sharia Authority of Central Bank of UAE.
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