Islamic Banking

Moslem banking (or participant banking)

Moslem banking is banking or banking activity that is unchanging with the principles of sharia law and its
practical application through the nurture of Moslem economics. Sharia prohibits the fixed or floating
payment or acceptance of specific interest or fees (known as riba, or usury) for loans of money. Investing
in businesses that provide goods or services considered contrary to Islamic principles is
also haraam (sinful and prohibited). Although these principles have been applied in varying degrees by
historical Islamic economies referable to lack of Islamic practice, only in the late 20th century were a number of
Islamic banks formed to apply these principles to private or semi-private commercial institutions within the
Muslim community.
An premature market economy and an early form of mercantilism, sometimes called Islamic niftyism, were
real between the eighth and twelfth centuries.The monetary economy of the extent was based on
the widely circulated currency the gold dinar, and it tied together regions that were previously
economically independent.




A number of economic concepts and techniques were applied in early Islamic banking, including bills of
exchange, partnership(mufawada, including limited partnerships, or mudaraba), and forms of capital (almal), capital accumulation (nama al-mal), cheques,promissory notes, trusts (see Waqf), transactional
accounts, loaning, ledgers and assignments. Organizational enterprisesindependent from the state also
existed in the medieval Islamic world, while the agency institution was also introduced during that
time. Many of these early capitalist concepts were adopted and further advanced i n medieval
Europe from the 13th century onwards.

The word Riba means excess, extend or addition, which according to Shariah terminology, implies any
excess compensation without due consideration (consideration does not include time value of money).
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