What is Islamic banking?
Islamic banking applies laws, values and beliefs of Islamic beliefs to the method of operation. The term sharia means laws, values and religion. The term Mu'amalat concerns the rules of Sharia, which specifically apply to contracts and transactions. Basically, Sharia provides moral values for Islamic banking. It's like an ethical code.
Sharia is the key to understanding Islamic banking. Sharia derives its rules from three sources, which are the Qur'an, Sunna and Islamic religious scientists. The Qur'an contains a revelation of Allah or God. According to Muslims, Allah made these revelations to the prophet Muhammad. The Qur'an is a source of Islamic law.
Sunna refers to the learning of Muhammad. It also includes the way Muhammad lived his life, which serves as an example for followers of Islam. Sunna is contained in Hadis, which are books. To understand the Qur'an, Sunnah must also study.
Islamic religious scholars provide interpretation, instructions and advice for institutions fromAphed to Islamic banking. If the Qur'an and Sunna do not solve a specific situation, then Islamic religious scientists will provide instructions to Islamic banks. Islamic religious scholars have developed the Sharia Supervisory Board to meet the needs of Islamic banking. These advice help Islamic banks to ensure harm to Sharia. Sharia advice is independent of banks and functions as a regulatory agency.
The interpretation provided by Sharia advice must be in accordance with the Qur'an and Sunna. Islamic banks must adhere to the religious decision of Sharia Council. The term Fatwa concerns the decision of the Sharia Council. If the financial institution does not meet Sharia, it is not involved in Islamic banking.
The key rule of Sharia applznii for Islamic banking is to avoid assessing interest. The Qur'an teaches that Allah has banned riba . Riba means interest or usury. Therefore, Islamic Banking cannotAt interest on his loans. In addition, Islamic banking cannot pay its customers for saving money at the bank's savings accounts because Sharia prohibits the assessment and interest payment.
Islamic banks provide services comparable to services provided by Western Banks. Examples of services include checking accounts, transfers of electronic funds, checks of passengers, safe deposition and accreditation. The bank charges its customers a fee for different services instead of interest. The Islamic Bank must obtain previous approval from the Sharia Council before the offer of new products or services. After the approval, the bank can introduce new products and services to its customers.