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Islamic Banking is a renowned and established form of commerce in the Middle East; with changing times it is becoming the most credible and preferred method of banking in the rest of the world. Islamic or Shariah-compliant banking aims to achieve equal distribution of wealth via profit-and-loss-sharing, risk sharing, while encouraging entrepreneurship. The legal and economic principles underlying the offering of products & services are derived from the two primary sources of Islam – the Quran and the Sunnah.

Besides the well-known prohibition of interest (riba), there are other key requirements or principles for Shariah compliance. (According to a business journal, Capco) Many Islamic banks are in the hot pursuit of making their way into the west especially in countries like Canada where there is a huge demand for Islamic Banks. According to the Vancouver Sun a Canadian Daily, Islamic banking which has assets worth 1 trillion dollars is being lauded by British Prime Minister David Cameron and supported by Canada’s Conservative government, major banks and credit unions, leading business schools and influential Muslims across the country. Clean and easy to understand methods of baking adopted by Islamic Banking is a huge plus point and is attracting customers across many countries.

Some of the world’s largest Islamic banks in the Middle East, Indonesia and Pakistan are looking at rebranding to appear less religious and more open to Western investors, this is also picking up in countries like Sweden.

Islamic Banking has also received a nod from the Nigerian central bank after years of attempts by several groups and organizations. This move was welcomed by a cross section of people and subsequently there was significant growth in the size of this sector. Islamic banking operators provide several Shari’ah-compliant products and services to cater for the diverse needs of their clients. These include products based on murabaha, mudaraba, musharaka, ijara wa iqtina and kafala.

Financing automobiles, household equipment, housing, and import financing have been the major focus of the Islamic banks, using murabaha, ijara wa iqtina and istisna contracts.

Posted on Jun 29, 2015

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