Essentials of succesful Islamic banking

While conventional banks are predominantly financial intermediaries that earn profits by obtaining capital from depositors at one interest rate and lending it to borrowers a higher interest rate, Islamic banking does not involve riba (interest). Islamic banks need several things to thrive: a supportive and speedy legal system; well-behaved corporate managers; a focus on overall risk instead of credit-worthiness; highly ethical behavior; a supreme shari`a body; uniform accounting standards; committed bank managers; and a progressive and resourceful outlook. A number of these needs stem from the fact that Islamic banks share risks with the groups they finance. The risks they are exposed to include credit risk, liquidity risk, exchange risk, and risk of government policy changes. The activities of Islamic banks encompass issuing Mudarabah (trust financing) certificates, issuing participation-term certificates, and sharing profits and losses. Knowledge on Islamic banking needs to be