Islamic Bank

Islamic Banking

Islamic banking is a banking system based on the implementation of islamic law (sharia). This system is based on the establishment of the Islamic prohibition to lend or collect a loan with a loan charging interest (riba), as well as the prohibition to invest in businesses categorized forbidden (haram). Conventional banking system can not guarantee the absence of these things in the investment, for example in businees related to the production of food or drink haram, media or entertainment business are un-islamic, and others.

Although these principles may be applied in the economic history of islam, but only in late 20th century began to stand up Islamic banks that apply for commercial institution of private or semi-privat in the Muslim community in the world.

Islamic banking has the same purpose as conventional banking, the banking institution in order to generate profits by lending capital, deposit funds, fund operations, or the activities as appropiate. Principles of Islamic laws prohibits the elements below in banking transaction are:

1. Commerce over illicit goods

2. Interest

3. Gambling and speculation are intentional

4. Ambigue and manipulative.

Comparison between Islamic banks and Conventional banks.

a. Islamic Bank

- Doing only halal investments according to Islamic law

- Wearing the principle of sharing , buy-sell, and rent

- Profit-oriented and Falah (happiness of the world and the hereafter according to the teachings 

  islam)

- Relationship with customers in the form of partnership

b. Conventional banks

- Invest either lawful or unlawful according to Islamic law

- Wearing the interest rate

- Profit-oriented

- Relationship with customers in the form of creditor-debitor

- Collection and distribution of funds is not governed by a board similar