Islamic banking: premises and practice

Islam is a complete system of life and directs Muslims to structure their social, economic, political, legal, and personal lives according to Shari'ah. It follows that an Islamic bank's aim is to utilize resources according to Qur'an principles. As such, Islamic banking operates on a profit-and-loss-sharing basis, for Riba (interest) has been strictly prohibited in the Qur'an Unlike conventional banks, Islamic banks seek to help the poor through their operations. Islamic economics stems from the utilization of resources in accordance with Allah's instructions, whereas capitalism depends on the exploitation of production relationships. Some of the services Islamic banks provide include Musharaka (partnership) and Mudaraba (trust) financing. Among other contract types are Salam (an agricultural finance practice) and Istina (turn-key contracting). The activities Islamic banks undertake can be means of fostering development.