Accomodating Islamic banking: a US perspective

Islamic banking has been developing for ten years in Muslim countries, alongside the conventional systems of these lands. Some Muslim countries, however, now wish to totally Islamize the banking that takes place within their borders. Pakistan's decision to totally Islamize has brought to the front the question of the interaction between the two banking systems. The State Bank's 1984 circular insisted that all banks adopt a profit and loss sharing approach. Of the Islamically acceptable banking techniques mentioned in the circular are ijara (leasing), musharaka (profit and loss sharing), and murabaha (mark-up sale). U.S. banks with operations in Pakistan obtained permission from the Federal Reserve Board and the Comptroller of Currency to modify their practices to make them acceptable to Pakistanis. The conventional banking system's evolution occured only after the question of interest was dealt with in Western society. While there is a vast body of law regarding conventional ba