The profit-and-loss-sharing approach of Islamic banks is similar to several of the practices and investment tools of conventional banks. Nonetheless, some important differences exist between the Islamic and conventional banking systems. The latter has more complicated practices than the former. The
Banker's Equity was formed in 1979 to aid the financing of Pakistan's private sector. The firm has achieved accomplishments in offering single-package finance, encouraging business ventures, and leading the discovery of new financing methods that comply with shari`a. Participation-term certificates (PTCs) promote long- and medium-term investment in the country.
The typical Islamic alternative to interest-bearing investments is participatory financing, in which parties split output. Such mechanisms, however, can only be applied to investments that produce tangible outputs. No participatory investment is possible for mute investments, which have no explicit yield. Two examples of mute investments are public schools and lighthouses. One proposed method of Islamically financing mute investments is through istisna , or contracted production.
Banker's Equity Limited (BEL) is a firm that has come to impact private-sector investment in Pakistan. BEL is a groundbreaking organization, both in the ideas it espouses and the practices it embraces. The firm is sponsored by the State Bank. The State Bank's chairman heads the board of directors, which is composed of leading nationalized bank officers and BEL's managing director. By providing capital and offering numerous services such as supplying foreign currency and legal documentation, BEL seeks to make financing a simpler process. BEL funds are drawn from commercial banks.
The recent oversubscribed release of another five-year government backed sukuk in Bahrain, issued on behalf of the Bahrain Monetary Agency (BMA), will continue to generate interest in the development of an Islamic secondary market.
Malaysia has a two-counter, side-by-side arrangement of Islamic and conventional windows at the same institutions. Some see Malaysia as leading the way in Islamic banking, while others argue that the Malaysian system is not truly Islamic. One leading Malaysian banker believes that
Malaysia's system of zaka has certain features as well as room for improvement. Five topics are of note: Malaysia's current methods of zaka payment and distribution; the position of zaka in the Malaysian economy; the institutions involved in the administration of zaka funds and the difficulties associated with the collection of zaka; religious councils and their role in zaka disbursement; and some suggestions for making the zaka system of Malaysia run better.
Islamic banking, within the larger context of Malaysia's economic and financial development, is partly the result of a favorable political atmosphere and a widespread acceptance of interest-free banking. To ensure its continued success as new Islamic financial institutions enter the scene, Bank