Fundamentals of an Islamic financial system

The principal aims in Islamic economic interactions are the improvement of the total community, harmony within the society, and good relations between the members of the community and Allah. All things belong to Allah, and justice is an element of the economic and social systems. Interest is forbidden, in order to increase the level of justice in financial transactions. Risk ought to be shared between both parties in a venture, since risk is inherent in all businesses. By the concept of wadi`a , banks are allowed to use the funds of depositors with the permission of those depositors. The bank is not obligated to provide a return, and the depositor may pull out his funds whenever he wishes. Mudaraba is a practice used even in pre-Islamic Arabia. In murabaha, there is a mark-up and resale, but there is no legal commitment to buy. Takaful, Islamic insurance basically comes in two forms--family and general. Muslims should implement the Islamic economic system in order to demonstrat