Islamic Banking in theory and practice

Islamic Banking in
theory and practice

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
TASK 1............................................................................................................................................3
1. Describe the central Islamic banking products based on fundamental techniques of Islamic
banking.........................................................................................................................................3
TASK 2............................................................................................................................................9
1. Describe the two ethical values of Islamic banking products and justify the economic or
legal challenges of any one ethical value.....................................................................................9
TASK 3..........................................................................................................................................10
1. Analysis the Islamic banking government within regulatory framework of two countries...10
CONCLUSION..............................................................................................................................14
REFERENCES .............................................................................................................................15

INTRODUCTION
Islamic banking is an financial activity which complies with Sharia that is Islamic Law
and it includes the various practical applications for the development of Islamic economics.
Sharia is based on the God's immutable divine law and the religious perspective (Abdel-Baki and
Leone Sciabolazza, 2014). There are various factors which strengthening the Islamic banking
such as high demand, financial instrument, regulatory framework, diversification in the banking
services, investment related products etc. Basically Muslim countries and communities follow
Islamic banking, so the late 20th century these principles implement by the private or semi-
private commercial institute. After 2009, there was around 300 banks and 250 mutual funds
complying with Islamic principles and by 2014 it was around $ 2 trillion Sharia compliant.
Sharia represent the total approx. 1% of total world assets which are from some Islamic countries
such as Gulf Cooperation Council (GCC), Iran and Malaysia. This report cover the various topics
such as central Islamic banking products that is based on the fundamental techniques of Islamic
banking, also cover the pros & cons of every technique. In addition, it includes the two ethical
values in Islamic finance and what are the economic or legal challenges they faces. It covers the
Islamic banking governance in the regulatory framework of two countries.
MAIN BODY
TASK 1
1. Describe the central Islamic banking products based on fundamental techniques of Islamic
banking
Islamic banking offer the huge range of Sharia Compliant products & services which is
implemented in the Muslim countries. Murabaha is overlooking the financial portfolio of Islamic
Banking Institute (IBI). Other than this, Ijara, Musharaka and Diminishing Musharaka used in
financing of IBI (Ahmed, 2014). There are various product & services which Islamic banking
offer and they follow the Islamic principles as well. These products offer in order to meet the
customer expectation and they offer in the various range such as.

Illustration 1: Mode of Finance, 2008.
Above mention picture represent the mode of finance which offer by the Sharia Banking.
According to Sharia, products & services of Islamic banking will be managed separately from
the Conventional banking side. Above mention mode of finance will be covered in the major two
categories such as deposit products & financing products. All the funds will be released on the
basis of Halal modes or under the supervision of Sharia Advisor. Some of the Islamic banking
products are mentioned below:
Deposit products: It includes the money which deposited by the customers in the banks
for safekeeping. It will maintained under deposit accounts which allow the citizens to secure
their money into banks or they can withdraw anytime according to their wish. In the deposit
products it includes the various accounts such as current & savings account which is called
Wadiah Dhamanah under the Sharia concepts (Alamer and et.al., 2015). It also contain general,
special or specific investment accounts which is called Mudarabah. Other these products, Islamic
banking also deals in money market where they issue Negotiable Islamic Debt Certificate
(NIDC), Islamic Negotiable Instrument of Deposit (INID) which is called Mudharabha or profit
sharing under Sharia concept of Islamic banking.