Is­lamic bank­ing

The Pak Banker - - NATIONAL - By Zahrah Khan

Is­lamic Bank­ing is a bank­ing sys­tem that is in con­so­nance with the ethos and value sys­tem of Is­lam. Is­lamic Shariah clearly de­fines what is nec­es­sary when it comes to the bank­ing sec­tor; the ob­jec­tive is to pro­mote the ap­pli­ca­tion of Is­lamic prin­ci­ples, law and tra­di­tion for fi­nan­cial and bank­ing re­lated busi­ness af­fairs and to pro­mote in­vest­ment com­pa­nies.

Is­lamic Banks ac­cept

de­posits when they can ei­ther com­mit to in­vest­ment or gen­eral de­posits. Banks en­gage in in­vest­ment ac­tiv­i­ties based on Musharakah (eq­uity par­tic­i­pa­tion), Mu­darabah or Qi­rad (agen­cies), Murabaha, Bai Salam (Post de­liv­ery sale ) and /or leas­ing en­gage­ments.

On the lend­ing side Is­lamic Banks have is­sued a num­ber of new lend­ing in­vest­ments such as Al­muqarada profit bonds and Al­mu­darabah cer­tifi­cates. Also these banks prac­tice con­ven­tional short term fi­nanc­ing on profit loss ba­sis.

The pro­hi­bi­tion of in­ter­est by Is­lam is the ba­sis of the de­vel­op­ment of Is­lamic bank­ing. Is­lam does not pro­hibit gain on cap­i­tal only in­ter­est so bank­ing is very much pos­si­ble in Is­lam. Is­lamic prin­ci­ples re­quires that per­for­mance cap­i­tal should be con­sid­ered while re­ward­ing cap­i­tal. Is­lam deems profit rather than in­ter­est to be closer to its sense of moral­ity and eq­uity be­cause earn­ing prof­its in­volves shar­ing risks and re­wards.

Is­lamic Banks need to per­form harder and bet­ter to gen­er­ate sta­ble stream of halal in­come so that de­pos­i­tors may also re­ceive halal in­come.

Is­lamic fi­nance al­lows for bet­ter dis­ci­pline in con­duc­tive fis­cal and mon­e­tary poli­cies. In­deed this was the hop of Quaid-e-Azam Muham­mad Ali Jin­nah. At the in­au­gu­ra­tion of State Bank of Pak­istan he said that eco­nomic sys­tem of west has cre­ated in­sol­u­ble prob­lems for hu­man­ity and the adop­tion of western eco­nomic prac­tices will not help us. Thus we must present the world an eco­nomic sys­tem based on true Is­lamic con­cept of equal­ity and so­cial jus­tice. The Quaid-e-Azam was ab­so­lutely cor­rect in his as­sess­ment, we as Mus­lims must set an ex­am­ple for the world.

Is­lamic Bank­ing is a con­cept that can be trans­lated into our daily lives easily. It not only al­lows for eq­uity but ac­cord­ing to Shariah law is help­ful for mo­bi­liza­tion of funds.

Is­lamic Bank­ing is a suc­cess, it shows that bank­ing can not only sur­vive with­out in­ter­est but also could be help­ful in achiev­ing the ob­jec­tive of de­vel­op­ment with dis­tribu­tive jus­tice by in­creas­ing the sup­ply of risk cap­i­tal in the econ­omy, fa­cil­i­tat­ing cap­i­tal for­ma­tion and growth of fixed as­sets and real sec­tor busi­ness ac­tiv­i­ties. By fol­low­ing Shariah we can make or lives eas­ier and bet­ter in all as­pects of life in­clud­ing bank­ing.

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