No interest

Islamic interest-free banking exists only in Pakistan and in Iran. The author focuses in this piece on the financial practices of Pakistan and its State Bank. Primarily, financing in Pakistan is done through two means--financing with markup and profit and loss sharing. There are 12 means of financing in total that are allowed by the governing body, although the financing with mark-up method is under fire by some who see it as too similar to interest and thus of questionable permissibility. The author discusses in particular musharaka , in which the bank takes a cut in the company's gains and losses, and mudaraba , in which an equity stake and a management group are both involved. While there are national regulations regarding maximum loans in Pakistan, foreign capital can be brought in above that limit. The potential size of finance projects is thus increased with increases in foreign capital inflow.