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Islamic banking

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Zohaib565 View Drop Down
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    Posted: 09 May 2015 at 12:42am
As we all know conventional banking system is also called '' Fractional Banking reserve system'' as every bank put its fraction of money in State bank as the state bank is the lender of last resort. State bank in return give that bank money with some interest too. As interest 'RIBA' is haram in islam so how could an islamic bank deals with state bank??
or how they can work without taking interest or what should they do??

Edited by Zohaib565 - 10 May 2015 at 1:45am
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muffe View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote muffe Quote  Post ReplyReply Direct Link To This Post Posted: 16 June 2015 at 7:54am
All banks also the Islamic ones are based on fractional reserve banking, i.e printing a piece of paper and calling it money. In terms of interest which is forbidden, Islamic banks use many different instruments like lease, Mudaraba, tawarruq, joint venture etc. Some are based on asset and the real economy, others are controversial and just mimicks conventional interest bearing instruments.
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ISLAM HASHTAG View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote ISLAM HASHTAG Quote  Post ReplyReply Direct Link To This Post Posted: 28 August 2015 at 10:27pm
I have a list of books,which are very easy to understand and explains Islamic banking in detail.One of the book is a workbook which teaches the practical implementation of Islamic Banking in all sphere.
Take a look,if this may answer your query..

http://islamhashtag.com/books-on-islamic-banking-and-islamic-finance/

Edited by ISLAM HASHTAG - 10 December 2015 at 2:21pm
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Ceo3 View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Ceo3 Quote  Post ReplyReply Direct Link To This Post Posted: 18 September 2016 at 11:57am
Fractional reserve banking is counter to the Shariah. Islamic banking operates on a 100% deposit backing system.
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Tim the plumber View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Tim the plumber Quote  Post ReplyReply Direct Link To This Post Posted: 20 September 2016 at 1:25am
Originally posted by Ceo3 Ceo3 wrote:

Fractional reserve banking is counter to the Shariah. Islamic banking operates on a 100% deposit backing system.


How does a depositer get paid for lending his money out?
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Ceo3 Quote  Post ReplyReply Direct Link To This Post Posted: 21 September 2016 at 12:39am
The simplest example would be a fixed deposit. Say a client invest for a year in an Islamic Bank. The bank would utilise funds in profit and loss sharing ventures, investment in approved stocks and buying and selling in cost plus agreements. The profit on these endeavours would be shared amongst the depositors/bank on a pre-agreed upon ratio. Should there be no profits the depositor would not gain anything and only the deposited amount would be returned.

Important to note if we use the Malaysian banking system that on average interest rate returns are only 1% point above their Islamic banking counterparts.
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Tim the plumber View Drop Down
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Tim the plumber Quote  Post ReplyReply Direct Link To This Post Posted: 23 September 2016 at 12:57am
Originally posted by Ceo3 Ceo3 wrote:

The simplest example would be a fixed deposit. Say a client invest for a year in an Islamic Bank. The bank would utilise funds in profit and loss sharing ventures, investment in approved stocks and buying and selling in cost plus agreements. The profit on these endeavours would be shared amongst the depositors/bank on a pre-agreed upon ratio. Should there be no profits the depositor would not gain anything and only the deposited amount would be returned.

Important to note if we use the Malaysian banking system that on average interest rate returns are only 1% point above their Islamic banking counterparts.


So you would be something like a shareholder in the bank. But nit get as much profit.

A 1% difference between doing things in the usual way and doing them in an Islamic way is a lot.

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Post Options Post Options   Thanks (0) Thanks(0)   Quote Ceo3 Quote  Post ReplyReply Direct Link To This Post Posted: 27 September 2016 at 12:43am
That is correct sir. The returns on Islamic products are on average not as high as conventional banking products. However the funds are in an investment fund rather than shares in the actual bank.

It promotes one of the basic tenets of Islam, redistributing wealth from rich to poor. Whereas traditional banking moves wealth from poor to the well off. The evils and prohibition of interest based banking is found in all religious scriptures. Therefore perhaps a better term is religious/ethical banking (if I may call in that) as opposed to calling it Islamic banking. Religious banking represents the equitable and just (for individual and society) alternative the "other" 99% of us have been looking for.
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