Profit and loss sharing as a substitute for interest in Islamic banking

The profit-and-loss-sharing approach of Islamic banks is similar to several of the practices and investment tools of conventional banks. Nonetheless, some important differences exist between the Islamic and conventional banking systems. The latter has more complicated practices than the former. The PLS system restricts the fields to which funds may be allocated. It yields returns that are not fixed, but since there is no component of ownership in a bank, no trading can occur of one's stake in the corporation. This makes the Islamic system potentially less 'flexible.' An Islamic bank faces greater strains on its resources because it participates more in the projects it finances. The chances of default, however, are not present in an Islamic banking system. Another plus of Islamic banking is the lack of issue charges. Best of all, Islamic banking gives Muslims banks they can use and expands the scope of the entire banking world in general and of the Islamic banking industry in