Comprehensive Report on Islamic Banking Principles and Practices

This report offers a comprehensive exploration of Islamic banking principles and practices. It begins by outlining various types of Islamic banking, such as participatory modes like Mudarabah and Musharakha, sales modes like Murabahah and Istisna, and rent-based modes including Ijarah. The report then delves into Islamic laws governing trading, emphasizing the importance of Sharia compliance and the prohibition of usury (riba), gharar (uncertainty), and unlawful goods. Furthermore, the report provides a list of prominent Islamic bankers worldwide, including major institutions like Abu Dhabi Islamic Bank and Al Rajhi Bank. Finally, the report provides a list of references used to compile the report.

Running head: FINANCIAL MANAGEMENT
Financial management
Name of the student
Name of the university
Author note

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Table of Contents
Types of Islamic banking...........................................................................................................2
Islamic laws on trading..............................................................................................................3
List of Islamic bankers in the world...........................................................................................4
Reference....................................................................................................................................7

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Types of Islamic banking
Various types of Islamic banking are as follows –
Participatory modes –
 Mudarabah – it means the equity finance. This includes a contract among 2 parties,
one is the investment manager and other one is the capital owner. Profit is shared
between the parties as per the agreed ratio (Iqbal and Molyneux 2016).
 Musharakha – it is also same like Mudarabah with only one difference is that under
Mudarabah the profit and loss both are shared at agreed ratio whereas under
Musharakha the loss is shared is proportion of capital share.
 Diminishing partnership – this is the contract among the beneficiary and the financer
under which both entered into the partnership to own the specified asset with the
attached condition that the financer gradually will sell his share to beneficiary with
the agreed schedule and agreed price (Seyed-Javadin et al. 2014).
Sales modes –
 Murabahah – it is the specific type of sale and by origin it is not a mode of financing.
Here the transaction is carried out based on Cost plus Profit and the seller reveal the
cost to buyer after adding the profit percentage t arrive at final selling price (Hanif
2014).
 Istisna – it is a contract under which the customer orders the manufacturer or
producer for manufacturing a particular commodity to be purchased by him.
 Salam – it is stated as the price is in cash, however, supply of the goods are deferred.
Rent based modes –

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 Ijarah – it actually means giving something on rent. This term is used under two
situations – (1) employing service of a person in exchange of wage (2) payment of
rent for using a property or an asset known as LAND (Erol et al. 2014).
 Tawaruq – for purchasing the commodity on credit and then selling it to the third
party at spot on loss with the main objective of getting cash is termed as Tawaruq.
Islamic laws on trading
As per the Sharia law, the Islamic trusts and institutions cannot invest in the stock
market. The basic law under Islamic for all the transaction is legal. Interactional relationship
among the men is unlimited irrespective of the fact that it is as per the Sharia or not. Each
period and place has its own specific model and form of interactions within themselves that is
distinct from other time period and other places. Therefore, it is not practical to limit and
confine the interaction to the specific form (Abedifar, Molyneux and Tarazi 2013).
Through the basic law for every trading is legal, some reasons are there that can alter
the legal state to illegal. Further, as the causes are limited difference to legal trading are in
unlimited number. However, various reasons those make the trading unlawful are as follows
–
 The trading that contains usury under that
 The trading that contains ghahar or unclarity
 Traded commodity that is unlawful or forbidden goods
 Trading that contains the requirement that may cause unclarity and usury that is to be
emerged (Abdul-Rahman 2014).
The above mentioned things are most prominent that causes a trading form that is to
be unlawful or illegal.

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List of Islamic bankers in the world
Top largest Islamic banks in the world are as follows –
 Abu Dhabi Islamic Bank
 Al Rajhi Bank
 Albaraka Banking Group
 AmIslamic Bank
 Amlak Finance
 Arcapita Bank
 Bank AlBilad
 Bank Al-Jazira
 Bank Asya
 Bank Islam Malaysia
 Bank Kerjasama Rakyat Malaysia
 Bank Keshavarzi
 Bank Maskan
 Bank Mellat
 Bank Melli Iran
 Bank Muamalat Malaysia
 Bank of Industry and Mine
 Bank Pasargad
 Bank Refah
 Bank Saderat Iran
 Bank Sepah
 Bank Tejarat
 Boubyan Bank

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 CIMB Islamic Bank
 Dubai Bank
 Dubai Islamic Bank
 Emirates Islamic Bank
 Export Development Bank of Iran
 Faisal Islamic Bank of Egypt
 Gulf Finance House
 Investment Dar
 Islam Brunei Darussalam
 Islami Bank Bangladesh
 Ithmaar Bank
 Kuwait Finance House
 Kuwait International Bank
 Kuwait Turkish Participation Bank
 Masraf Al Rayan
 Maybank Islamic
 Noor Islamic Bank
 Omdurman National Bank Bank
 Public Islamic Bank
 Qatar International Islamic Bank
 Qatar Islamic Bank
 Shamil Bank of Bahrain
 Sharjah Islamic Bank
 Syria International Islamic Bank
 Tamweel

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 Türkiye Finans

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Reference
Abdul-Rahman, Y., 2014. The Art of RF (Riba-Free) Islamic Banking and Finance: Tools
and Techniques for Community-Based Banking. John Wiley & Sons.
Abedifar, P., Molyneux, P. and Tarazi, A., 2013. Risk in Islamic banking. Review of
Finance, 17(6), pp.2035-2096.
Erol, C., F. Baklaci, H., Aydoğan, B. and Tunç, G., 2014. Performance comparison of Islamic
(participation) banks and commercial banks in Turkish banking sector. EuroMed Journal of
Business, 9(2), pp.114-128.
Hanif, M., 2014. Differences and similarities in Islamic and conventional banking.
Iqbal, M. and Molyneux, P., 2016. Thirty years of Islamic banking: History, performance and
prospects. Springer.
Seyed-Javadin, S.R., Raei, R., Iravani, M.J. and Safari, M., 2014. Presenting a conceptual
model to explain the role of strategic management and planning in Islamic banking
competitiveness. International Letters of Social and Humanistic Sciences, 26, pp.46-56.