Islamic Finance

The religion of

The Government of Pakistan took several steps to Islamize Pakistan’s banking system. Despite setbacks, they ultimately succeeded in setting up this system. After the Islamization of banking, Islamic products were introduced. Moradabad operated as a corporate entity under the regulating framework of Security and Exchange Commission of Pakistan (SECP). The Moradabad initially made good progress, but later on, its growth was checked. Other Islamic products, like

There is a consideration regarding the impact of Islamic banks' operations on the economy's money supply. Unlike Western banks, money creation measures taken by Islamic banks help generate real wealth in society. The expansion of the money supply when such an operation occurs in an Islamic economy will be smaller in magnitude than the consequences of similar credit creation by Western banks. Thus, central banks should subject Islamic banks to lower reserve requirements than conventional banks.

Islamic banking rejects the notion of fixed-interest debt contracts in favor of profit-and-loss-sharing partnerships. Islamic banks might be able to offset the disadvantage implied by the need for extra monitoring of these debt contracts by operating within a strong bank-based financial environment, where there is both a better flow of information and stronger commitment between borrower and lender. At this stage, however, that sort of environment does not appear to be at hand. Thus, Islamic banking is not now useful as a development strategy.

Because of their involvement with interest (riba), Islamic scholars reject traditional banking.

Non-interest-based financial instruments and institutions are more efficient than interest-based ones. A case study of Tunisia illustrates the merits that an Islamic system might bear. The investigation used time-series analysis over 25 years to examine the relative stability and policy utility of the two divergent financial systems. The study concluded that, for the purpose of Tunisian intermediate policy targeting, an interest-free system is preferable to one with interest. The interest-free system makes such policy targeting useful while the other system does not.

Following Pakistan's 1985 ban on the giving and taking of interest, foreign banks in Pakistan changed their behavior and are now mandated to declare profits every six months and share those profits with depositors instead of giving them pre-determined interest payments. The State Bank has issued a list of acceptable financial practices. Among these are

An international seminar attended by professionals from 17 Islamic countries, the United States, and the United Kingdom, was held in Cairo and dealt with