The Islamic banking system

Pakistan and Iran have switched to completely interest-free banking systems, and over three dozen distinct Islamic banks are conducting business in the world today. Still, many people are unaware of the role or mission of Islamic banks because the place of banking in Islamic economics is not well-understood. According to some Islamic legal scholars, an Islamic economy has three sectors: siasi (public and governmental); ijtimai (oriented toward or affiliated with social welfare, charity, and alms); and tijari (private and commercial). Banking falls into the third sector. Thus, since income distribution is an issue of the first sector, Islamic banks are not primarily concerned with resource equity. Since zaka and charity are issues of the second sector, Islamic banks are not designed for humanitarian causes. An examination of the types of contracts that Islamic banks make shows that Islamic banking can assist the Muslim community by taking care of individual needs in the tijari se