Dar al maal al Islami: a catalyst for the growth of Islamic financial institutions

Muslims desire to live according to Islamic principles, including those concerning finance. A fundamental principle in this area is the prohibition of riba (interest in all its forms). Numerous studies have proven the feasibility of replacing an interest-based financial system with one based on mudaraba or qirad , which are arrangements of partnership or profit-sharing between the supplier and user of capital. Another halâl technique includes murabaha (the sale of goods and equipment at a price that may be higher than the spot price if the purchaser pays on a deferred basis). Shari`a permits some temporary measures that can be implemented to supplement a profit-sharing arrangement, though Islamic banking and finance must be based on profit-sharing. Islam prohibits interest and permits profit-sharing because a fixed rate of return proves unfair to both borrowers and lenders. A fully-workable model of Islamic banking and finance is now available. Dar Al-Maal Al-Islami (DMI), an