Articles

A large number of Islamic financial institutions lack strength in their approaches and opt to cover this reality with idealism. Such is not the case for the Islamic Investment Company of the Gulf (IICG). IICG uses 'Swot' analysis in order to assess its stand relative to its competition. The institution is owned by Dar al-Maal al-Islami, a body with its headquarters in Geneva. A number of Islamic banks in operation today do not have young managers. IICG appears to have adequate strength in three key area--capital base, clear strategy from a purpose-minded board, and capable management.

There are now over 100 Islamic financial institutions worldwide; two of the pioneers were Dubai Islamic Bank and the Islamic Development Bank. The deposits in Islamic banks are figured at more than $10 billion, less than what might have been expected had growth not been intentionally slowed due to a dearth of investment opportunities. The performance of Islamic banks has provided evidence that Islamic regulations put into practice in the contemporary banking world can lead to a bank's financial success.

Islamic interest-free banking exists only in Pakistan and in Iran. The author focuses in this piece on the financial practices of Pakistan and its State Bank. Primarily, financing in Pakistan is done through two means--financing with markup and profit and loss sharing. There are 12 means of financing in total that are allowed by the governing body, although the financing with mark-up method is under fire by some who see it as too similar to interest and thus of questionable permissibility. The author discusses in particular

The Egyptian government has taken measures to regulate the Islamic banking industry after a number of crises have been encountered by financial institutions. Prime Minister Atef Sedki has called for legislation mandating that investment houses become limited companies that guarantee rights to shareholders, that annual reports be produced, and that reserves be deposited in a central fund. One incident that led to the government action was the failure of Al-Rayan Islamic investment house's move to create a joint-stock subsidiary.

The author describes the huge losses faced by Egyptian investors in the collapse of so-called Islamic banks. These banks drew in the life savings of perhaps a half million investors and called themselves Islamic because they did not use or charge interest, which is banned in al-

The author evaluates the gradual process by which Pakistan's banks have been converting themselves into Islamic institutions. The slow pace at which reform has gone on allows banks to continue to pull in profits and achieve growth without having their entire institutions turned upside down. These banks have been testing various Islamically acceptable methods of profit-generation and the search for innovative new projects has proven stimulating.

The author presents a summary of the operations Islamic banks provide in order to create profits while avoiding riba (interest), which is forbidden in al-

The author discusses the similarities and differences between Pakistan's Islamic banking operations and the operations of Western capitalists. The main tenet that drives Islamic banking is that profit and loss should be shared by the both the financier and the loan-taker--the risk is always to be taken on collectively. This is a tenet absent in much of Western banking. Islamic finance is in this respect close equity-financing as it is known by conventional bankers. The author mentions the emphasis placed in

Banking free of riba (interest), in its rapid and wide spread, has principally developed three practices--