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Islamic banking refers to a system of banking or banking activity that is consistent with the principles of Islamic law (Sharia)

. Sharia prohibits, (Riba, usury) . i.e, interest free business.

EVOLUTION OF ISLAMIC BANKING


Islamic banks are seen to involve themselves as financial intermediaries and investment oriented institutions in bringing about wellbeing of the community, society and the economy in the light of Shariah

Set of banking services are same as conventional Bank. Clearing mechanisms, bank drafts, bills of exchange, travelers cheques, etc. Are offered. Current accounts, savings accounts, and investment accounts. Are offered by conventional banking

Justice, equality and solidarity


Forbidden objects and creatures. Acquisition of property rights. Property (wealth) should be used in a rational but fair Way. No gain without either effort or liability

Any predetermined payment over and above the actual amount of principal is prohibited. The lender must share in the profits or losses arising out of the enterprise for which the money was lent. Making money from money is not Islamically acceptable

Gharar (Uncertainty, Risk or Speculation) is also


prohibited.
Investments should only support practices or products that are not forbidden -or even discouraged- by Islam.

Basic Framework: Prohibition of Riba


Riba as interest (differences among Muslims)

Interest in all forms prohibited


All interest-based transactions should be avoided Interest-based transactions are seen as unjust: risk on the borrower

Objectives of Islamic Banks:


To help Muslims, execute their financial dealings in
social values of the Shariah To Serve all Muslim communities in mobilising and utilising the financial resources. To serve the Islamic communities strenthening the oconomic ability

Prohibition of Interest

Low Consumer Lending


Profit and Loss Sharing

High Real Sector Investing

Basic Framework: Concept of Money


Money

as a form of wealth

Money: primary function: medium of exchange No price should be charged for money Basic rule in lending: return an equal amount

Current Account

Deposits available

Savings Acoount

Investment Account

Investment Financing

Trade Financing

Lending

Other Financial Services

MODES OF FINANCING

Investment financing
musharaka

Trade financing

lending

other financial facilities

mudarabha

loans with a service no cost charge loan

Over drafts

Mark up leasing trade financing

Hire purchase

Sell and buy back

Letters of credit

Establishing appropriate risk and liquidity management techniques

Achieving consistent Shariah supervision


Managing the talent pool Addressing legal and tax restrictions

Islamic banks can give inclusive growth along with control over inflation. Equity finance is extended by lower cost of credit.
It provides equitable share of profit. It provides small amount of loans

Islamic banking being a young concept can help development of poor economy. Though having few draw backs it has its own advantages to stand on.

We would like to thanks Mr. Viral Dharani our faculty for giving us the topic of ISLAMIC BANKING which being a very new concept is now known to us We received bundles of knowledge and an updated news of the economics.

PRESENTED BY
Monali Shah 19 komal Salgaonkar 17

Aparna Vaze 20

Seema Nishad 30

Tanvi Sidhaye 7

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