Islamic Banking: Problems and Prospects | |
|Islamic Banking | |Before I discuss about the problems and prospects of Islamic Banking, I am discussing some primary issues such as definition, | |objective and history of modern Islamic banking. | |Definition: | |An Islamic Banking is a financial institution that operates with the objective to implement and materialise the economic and | |financial principles of Islam in the banking arena. | |The Organisation of Islamic conference (OIC) defined an Islamic Bank as “ a financial institution whose statutes, rules and | |procedures expressly state its commitment to the principles of Islamic Shariah and to the banning of the receipt and payment of | |interest on any of its operations.” | |According to Islami Banking Act 1983 of Malaysia, an Islamic Bank is a “company which carries on Islamic Banking business....... | |Islamic Banking business means banking business whose aims and operations do not involve any element which is not approved by the| |religion Islam.” | |Objectives: | |The objective of Islamic Banking is not only to earn profit, but to do good and bring welfare to the people, Islam upholds the | |concept that money, income and property belong to Allah and this wealth is to be used for the good of the society. | |Islamic Banks operate on Islamic principles of profit and loss sharing and other approved modes of Investment. It strictly avoids| |interest which is the root of all exploitation and is responsible for large scale inflation and unemployment. | |An Islamic Bank is committed to do away with disparity and establish justice in the economy, trade, commerce and industry; build | |socio-economic infrastructure and create employment opportunities. | |History and Present Status of Islamic Banking around the World | |The History of Islamic Banking : | |The History of Islamic Banking could be divided in to two parts. First When it still remained an Idea, Second-When it become a | |reality-by private initiative in some counties and by law in others. | |Islamic Banking as an Idea : | |The scholar of the recent past in early fifties started writing for Islamic Banking in place of Interest Free Banking. In the | |next two decades Islamic Banking attracted more attention. | |Early seventies saw the institutional involvement. Conference of the Finance Ministers of the Islamic Countries was held. The | |involvement of institutions and Government led to the application of theory to practice and resulted in the establishment of the | |Islamic Banks. In this process the ‘Islamic Development Bank (IDB)’ was established in 1975. | |The coming into being of Islamic Banks:...
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