Islamic Banking is interest free banking, in which there is no fixed rate of return. Islamic banking is the banking system which is run in accordance with the Islamic laws and the Shari a’ board; that guides the institutions. This Shari a’ board authorizes the products that whether these are Shari a’ compliant or blogger.comted Reading Time: 7 mins Critique Of Islamic Banking Essay. Words | 5 Pages. Critique on Islamic Banking In the last two decades, Islamic Banking has expand and grown globally after gaining support and agreement from the oil-rich Gulf States such as Bahrain, Qatar, Iraq, Saudi Islamic Banking 1. The accountability process should be viewed as a social, and not only as an economic Concept. The find providers' 2. The accountability process should be viewed as a mechanism that lays down the ethical foundations for accounting and 3. The accountability process
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Islamic banking principles are developed and operated within islamic banking essay guidelines of Sharia principles. The main source of Sharia law is the al Quran, which prohibits any money that is far above the principle amount in the lending business by terming it haram and hence illegal. However, a debate has arisen in the wake of modernisation of the convectional banking dynamics trying to influence the Islamic banking into charging interests rates on loans, but Muslims are reluctant as for them, islamic banking essay, riba is illegal according to the powerful speech of Prophet Muhammad, which has since been the Magna Carta for the Muslims, islamic banking essay.
Conventional bankers thrive on charging interest on loans, and in some cases, the interests are inflated to meet selfish ends of a few, islamic banking essay. This aspect indicates how religion can greatly influence the economic activities in the world as key banking principles of Islamic banking system are based on Islamic religion and virtues. The islamic banking essay learning points in this article include the source of Sharia law and other important principles of the Islamic banking system coupled with definitions of riba by various institutions related to Islamic religion and scholars.
Riba is the most analysed element of Islamic economic and banking system by the Sharia law as Prophet Muhammad and the Holy Quran prohibit it. Prophet Muhammad speech was brief, but very powerful, which marked his farewell sermon to the Islamic religion after preaching for a long time. He had mentioned three powerful points in the speech, which include belief of one God, abiding to the rule of law and morality, and lastly he declared riba as haram and advocated for the sanctity of material life for the benefit of all humanity.
He stressed that God has forbidden people to charge interest and hence all interests are to be waived, islamic banking essay. However, according to Sharia, riba is the premium charged by the lender to the borrower that is above the principle amount of the loan. Considering all forms of definitions of ribathey all state that riba is the amount charged above the principle loan amount to the borrower. Many verses in the Quran, talk about the prohibitions of riba, but two are most convincing.
From these two books, it is clear that riba was considered an act of social injustice and a great sin to God. Hence, Prophet Muhammad advocated its ban within the Islamic financial systems.
However, islamic banking essay, the Quran and the Hadith, which prohibit ribaare the two primary sources of Sharia; hence, Sharia laws cannot allow riba based on the strong foundation principles against riba in the Islamic banking systems.
The Quran prohibits riba in four gradual stages where in the first stage, which is found init praises charity and zakat and condemns riba after comparing the two. The second stage islamic banking essay found in where it attaches riba to the Jewish cultural practices and thus condemns it. Third stage is found inwhere it prohibits lenders on charging double the amount and multiple riba and the fourth stage is found at 2; where conclusive prohibition of riba is made and partially defined as any excess amount charged over the capital amount Nazim, islamic banking essay, These stages underscore the Sharia and Usuli principles of Islamic banking principles.
There has been a controversy between modernised conventional banking system and the Islamic banking system on the definition of riba and the legality of charging interest on loans, islamic banking essay. Conventional bankers charge interest on loans and claim that interest is used to finance banking activities and as a source of revenue to the government islamic banking essay the form of tax.
To conventional bankers, charging interest on loans is a legal issue and thus they advocate the adoption of the same in the Islamic banking system. On the other hand, Islamic principles condemn riba for its allocation of wealth on the hands of a few people in the society. Critics of charging riba argue that the conventional banking system bars the majority from accessing loans for fear of defaulting to pay the loan islamic banking essay amount together with the riba, islamic banking essay.
This argument has been a revelation to the conventional bankers as they agree that riba, or interest according to their definition, contributes to the barring of the majority of people from accessing bank loans. Islamic banking system is not as privatised as the conventional banking system due to lack of huge profits that are made from loan interests. On the other hand, conventional banks act as profit making financial institutions, which contradicts the will of the Islamic banking principles whereby a financial institution ought to help those who do not have capital by availing the same.
This aspect has contributed to the economic dualism in countries that have universal conventional banking system, but the case is different in countries that use universal Islamic banking system. Hence, islamic banking essay, Islamic banking has great practicality in the modern world of economics as it caters for the majority who cannot access loans from conventional banks for fear of defaulting on repayment of the riba charged above the loan principle amount.
Abdulkader, T. Interest in Islamic Islamic banking essay Understanding Riba. New York, NY: Islamic banking essay. Hassan, K. Riba and Islamic Banking. Journal of Islamic Economics, Banking and Finance, 2 islamic banking essay Kamali, M. Cairo, Egypt: Islamic Texts Society. Nazim, S. Information Sources on Islamic Banking and Economics: Need a custom Critical Essay sample written from scratch by professional specifically for you?
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21/2/ · [pic] ISLAMIC BANKING: IS IT REALLY “ISLAMIC”? By: Omar Mustafa Ansari & Faizan Ahmed Memon Is it really Islamic? . In this era of development and growth in Islamic finance and banking, this is a question being raised at every forum by various quarters. All those who raise this question, are undoubtedly well-wishers of Islam, Islamic economic system and Muslim blogger.comted Reading Time: 10 mins 20/8/ · Essay Sample: BACKGROUND OF THE STUDY Interest free banking is a banking system that is consistent with the Sharia'a (Islamic law) Now a day Islamic banking business is +1 () Free essaysEstimated Reading Time: 10 mins Islamic Banking is interest free banking, in which there is no fixed rate of return. Islamic banking is the banking system which is run in accordance with the Islamic laws and the Shari a’ board; that guides the institutions. This Shari a’ board authorizes the products that whether these are Shari a’ compliant or blogger.comted Reading Time: 7 mins
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