Islamic Banking

3.1 The Financial System The possibility of a pecuniary transcription of rules that would conform with the laws of Sharia was discussed as early as in the mid-forties (Warde cc0), but the idea was not put in do until the establishment of a rural rim in Egypt in 1963, followed by a cooperative bank in Pakistan in 1965. Since the creation of the Muslim Development Bank (IDB) in 1975 (Elgar 2003), the Muslim banking system has developed into a rapidly developing member of the international banking and capital markets. Today thither argon more than 200 Moslem banks in operation(p) in oer 70 countries, including some of the Muslim world and several westerly countries. In addition, there are 50 Islamic indemnity (takaful) companies which are operational in 22 countries as salutary as Islamic investment houses, mutual funds, leasing companies and commodity art companies. There are also hundreds of small Islamic financial institutions such as urban coo perative credit societies and financial associations that are operating at a local level and dealing with urban units, small business firms and individual households (Elgar 2007). So what is Islamic banking? It is delimitate as those financial institutions that are establish in their objectives and operations, on the Islamic law, the shari?a.

Shari?a as a legal system is base on the code of bearing derived from the Qur?an, the Holy admit of Islam, and the Tradition of the Holy Prophet, the Hadith. For banks to be competent to conform to Islamic rules and norms, five religious features must be followed in call of investment behavior (Elgar 2007): ? Riba is prohibited in all transactions. ? credit line and invest! ment are based on halal activities. ? Maysir (gambling) is forbid and transactions should be drop from gharar (speculation or uncertainty). ? Zakat (almsgiving) must be paid by the bank to benefit society. ? All activities should be in line with Islamic principles, and there should be a special shari?a carte that...If you want to get a full essay, order it on our website: OrderEssay.net

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