Articles

One of the major hurdles in eliminating riba from the economy is the division in the

Islami Bank Bangladesh Limited (IBBL) is an Interest-Free Financial Institution in Bangladesh. A case study of its operations demonstrates how Islamic banking differs from the traditional banking system. The Islamic banking system has a unique set of financial tools and techniques. The presence of an Islamic bank can diversify a financial market.

Interest rates have long been recognized, by classical neo-classical, and contemporary economists, as one of the factors that determine the level of savings in an economy. Although there are exceptions, it is a generally accepted that interest rate has a positive relationship with savings. Presumably, customers are guided by the profit maximization theory. Since there is no pre-determined rate of return involved in the Islamic banking system, it is unclear whether Islamic bank customers are subjected to the normal conventional theory of economic behavior.

Due to factors such as chancing client needs, new technologies, and regulatory reforms, the banking industry is changing rapidly. Regulatory reforms in financial modernization have triggered new industry dynamics, changing the environment yet again. The 1993 repeal of the Glass-Steagall act has been harmful to the Islamic banking industry. Larger, conventional banks are now offering products that compete more directly with Islamic banking products. Banking institutions deserve to have the flexibility to conduct any genuine financial activity in any genuine way.

Islamic banks can provide efficient banking services to customers in the U.S. if they are supported with appropriate banking laws and regulations.

The Islamic bank Bank

With the right business model, LARIBA mortgage financing can be a viable option in the United States. It can only be successful if marketed at the local grassroots level to the estimated initial market of 7,500 households requiring about US$200 million of financing. Modeled as an alternative to traditional mortgages, LARIBA is a halal paradigm consisting of two parts.

Business organization contracts often spur conflicts due to information asymmetry. Islamic business ethics can combat this problem. If an Islamic firm implements business contracts as designed and approved by the Shari`a, then principal-agent problems can be minimized.

Financial contracts involving the use of bay' al-inah and bay' al-dayn have been extensively used in the design of Malaysian Islamic bonds. Both of these mechanisms have been found unacceptable by Islamic scholars. The use of financing based on Muqarada and

This paper provides a practitioners perspective on the overwhelming need for prudent management of liquidity and development of Islamic money market instruments. (Abstract provided by journal/author; www.islamic-finance.net)