In the beginning, many Islamic countries could not give out the best business to such banking systems as it was prohibited in Islam to receive the money without any effort. This school of thought was very rigid and was presented by a particular sect of religious leaders so; strict believers did not go for the interest receiving very often. However, soon Muslims realized that there must be a system which could ease Muslim society with the banking facility without countering the Islamic laws and regulations. It was thus a banking system named “Islamic Banking” was brought in practice. Let me tell you what the term Islamic banking signify and how it works in differently than other banks.
Before you know about Islamic banking; you must get educated on the term Riba; Riba means the profit that you get without investment. This is known as interest in the common commerce language. Riba is strictly prohibited in Islam. The Holy Book has warned the believers several times to keep away from such trade that brings Riba in. even the persons dealing with such business are declared surely to go to punishment on the day of judgment. These kept Muslim communities not go for saving accounts or the loans with which they have either to pay extra money or to receive extra money.
Islamic banking was aimed at the purpose of facilitating the Muslims to have an ease of taking loans without paying heavy interests. This could have saved Muslims economy from being going against the Islamic laws. The purpose of Islamic banking was to bring the Islamic economic laws in practice which must be done especially in Islamic states where Islam is declared as the state region. This banking introduced a new system where Muslims can enjoy the profit as the shared profit rather than taking it as interest.
It also offers loan offers. In the procedure, one has to give the documentation showing that he is able to pay or return the loans in the specific duration of years or months as dealt. After completing the documentation, the bank issues the requested amount of money take for either to make a purchase of car or to build a home or to run a business. Instead of giving loan to buyer, the bank purchases the item or the product from the seller and resells it to the buyer or the person who has applied for the loan. The person is given the facility to pay in installments. However, late payment brings penalties to the buyer.
Islamic banking works on the principles of sharing loss or sharing profit. Here the bank and the customer share the loss or the profit faced. So, none of the party neither suffers with the complete loss nor enjoys the whole of the profit. The profit or the loss is equally shared by the both parties as it is done in the business by the business partners. This is somehow is considered as per shriah and is opted in many Muslim countries. It has brought a great change and has marked great business in the Muslim states.
Many banks also have a separate department in the system dealing with the Islamic ways of banking. Such departments are termed as Islamic banking department. State bank of Pakistan has the largest Islamic banking department. This department is only concerned with the people who want to take loans through Islamic banking system and are hesitant or not confident for applying their loans through other banking network working in the state. This department receives the applications and considers them as per the bank policy and the rules.
These banking networks have tremendously become popular in the Islamic states but have failed to win the global market in the banking system. Pakistan is making the major part of Islamic banking as here it has won the religious opinion thus people are paving their way through this to take the advantage of easy payable loans to return the money. It helps them to make their job easy as it gives loans people to run their own business on comparatively easy terms which other banks do not. It also helps them to buy a home and gives them option to return the money in the fixed installments.
International and global community does not like the way Islamic banking operates its system. The reason behind is they are not restricted to take or pay interest by their religious sermons. So, they feel it a hassle to opt the way Islamic banking leads. Therefore, they are very comfortable with the international and usual banking systems which provide a lot of interest returns on the fixed deposits made in these banks. Another reason of its unpopularity is perhaps its long time duration payment tenure which makes people bound to the monthly installments and brings unease to them.
Islamic banking is passing through embryonic phases. It is travelling to reach at the established state where it can be successful in winning a secure part of international market as well. Islamic states also need to support this Islamic banking on their lands. The government must play an important role in making this popular in the public first and then to propose its business on the international platform. Islamic states must focus in its growth as they must have their own ways of dealing money issues.
Some people do not consider it a true way of Islamic banking and claim it to be against shriah.
