The changing face of Islamic banking

Westerners who do not fully understand the Islamic banking system view its institutions critically. They do not understand the financial constraints imposed by the principles in the Qur'an. The term riba -- otherwise known as interest -- is related to the amount in excess of principal. Islam prohibits the charging of interest. The fact that Islamic financial institutions share in all profits and losses incurred by an enterprise to which they lend money is a most unusual concept to Western bankers. Musharaka (partnership) may occur in the form of a sharikat mal (finance partnership), sharidat a''mal (labour partnership), or sharika wujuh (credit partnership). One form of Islamic finance is murabaha , which is the sale of a commodity at a stated profit. Ijara is a contract for leasing a building or equipment for a predetermined amount. In a mudaraba , which is a form of trust financing in which profits are distributed at a pre-determined proportional rate, the investor is not lia