If Islamic banks cannot invest in bonds, T-bills, and commercial paper, or lend to finance inventory or projects for interest, it defeats the whole purpose of banking. Even in Muslim countries, what is called Islamic banking is - to put it in the dismissive words of one western critic - "normal banking sprinkled with holy water." At best, Islamic banking is a way to deny the existence of interest and make it easier for Muslims to accept the idea of banking since the Qur’an includes strong injunctions against the giving or taking of "riba" - interest.
Islamic Banking system is banking system that guided by principles of Islamic laws (Sharia). In Islamic banking system, the most important feature is prohibited of interest (Riba), no matter what type of form or source it is. Riba is the fixed increase on the capital, collected against a fixed period. According to Qur’an, in all type of transactions, both receipts and payment of interest is prohibited. People who dealing of lending money in three conditions which are addition in the principal amount or capital, increment to the additional amount fixed in advance and the dealing made conditional to the two mentioned clauses are consider dealing of Riba.
But doing things such as bailing out homeowners in risk of foreclosure or changing contracts is not part of this power. The original intent of this power was to ensure free trade among the states, not to give Congress the power make whatever rule it wishes about anything remotely affecting interstate commerce. The Constitution should be amended before Congress does anything that is not expressly granted to it if it was found that government should have a role in dealing with the foreclosure crisis. But the best course of action for Congress to take is to let the free market work. Ironically, free market capitalism is often blamed for the housing bubble.
· The political, military, and economic weaknesses of the world of Islam are due to having strayed from Islam and followed western, secular and materialistic ideologies and values. Both western liberal nationalism and Marxist socialism have failed, because they are antithetical to Islam. · Islam as found in the Qur'an and the Hadiths, and in the example of the early Islamic community/state provides the true alternative ideology for Muslims. · Muslims must re-establish God's rule, the sovereignty of God on earth by re-instituting Islamic Law, the blueprint for society for all time. · The new Islamic order does not reject science and technology.
1.1 Introduction Islamic banking can be defined as the prohibition of riba’ or interest in the banking transaction. It pays the investor profit-sharing dividends and offers borrowers fixed repayment rates. Conventional interest rate are deemed not “halal” or legitimate by Islamic law (kamus perwira: 1998:451) Prohibition of Riba’ was stated by Allah SWT in Holy Quran in Surah Al-Baqarah verse 275 “Allah has permitted trade and prohibit riba”. Owing to the highly competitive environment, it is important to Islamic bank to study the customer perception to increase the market of product and services of Islamic banking in Malaysia effectively (Dusuki and Abdullah, 2006, Thambiah, Nathan and Eze, 2008). This study is to investigate the perception
In this banking system, banks are operated by Islamic laws (known as Sharia), so Islamic economic principles are considered as primary guidance. Two basic doctrines behind Islamic banking are the sharing of profit and loss and, significantly, the prohibition of the collection and payment of interest . Hence unlike conventional commercial banks, Islamic banks do not pay or charge interest on lending or borrowing of money. This is because the Sharia’s strictly prohibits, among other things, the receipt and payment of riba (interest) /. The interpretations to clarify the meaning behind this restriction suggests that earning or charging extra amount of money from debtor has to be seen something as immoral behavior, because making pressure on your borrower is actually unfair from the view point of Islam.
Islamic banks offer financing which is backed by assets. Islamic banks cannot deal in documents and it is due to the asset backed nature results in dynamic economic activities. Additionally, Islamic banks need to comply with conventional regulatory standards as well as Shariah standards. Islamic banks do not conduct business with tobacco, alcohol and other dangerous toxic producing companies. Islamic banks are not merely interest-free.
It is the key difference between Islamic banking and conventional banking. In Islamic banking interest is defined as an exploited increase or a gain, which can’t be justified. Creditors are not allowed to take advantage of borrowers if there is the need to lend a loan .So, adding interest on top of the existing amount borrowed is prohibited. Alongside Islamic law, Christianity and Judaism also state that interest (Riba) should be condemned, as it leaves the bo...
The system also sets certain limits within which the individual can earn in order to satisfy his/her basic needs and luxuries, and organizes his relationships with others according to a particular fashion. So Islam prohibits the production and consumption of alcohol by Muslims, and it does not consider it an economic material. Islam prohibits the taking of Riba (usury, interest, etc.) and its usage in transactions in the Islamic state. It does not consider interest as an economic commodity, whether for Muslims or non-Muslims as interest will lead to inflation that cripples the economy.
Plus, prohibition of non-serious bidding (Najash) which is bidding on commodities, shares, stocks and bonds. Prohibition of misleading marketing (Khalabah) is trying to sell to consumers with information that is not necessarily true, such as the quality of a good is highly overrated , which is unfair practise .And, finally, freedom from detriment (Dharar). 4.0 Conventional Banking Since, the background of Islamic banking and law has been defined; the background of conventional banking can now be explored. Conventional banking provides a financial service that does not have any morals or values to follow, and has no ethical concerns, instead their main purpose is to allow profit to be created, with very little restrictions. Without there being any prohibitions with conventional banking, the methods of the banking system can be examined to compare and contrast them with Islamic banking.