30 Facts About Islamic banking

Involvement of institutions, governments, and various conferences and studies on Islamic banking were instrumental in applying the application of theory to practice for the first interest-free banks.

Islamic banking's statement resulted in "pandemonium" in the parliament, a demand by members of leading Islamist political party to immediately respond to these allegedly derogatory remarks, followed by a walkout when they were denied it.

Council's decree notwithstanding, over the years a minority of Islamic banking scholars have questioned whether riba includes all interest payments.

An early market economy and an early form of mercantilism, sometimes called Islamic banking capitalism, was developed between the eighth and twelfth centuries.

The first, experimental, local Islamic banking bank was established in the late 1950s in a rural area of Pakistan which charged no interest on its lending.

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Islamic banking scholars issued a fatwa stating they had "no objection to the use of the term 'interest'" in loan contracts for purposes of tax avoidance provided the transaction did not actually involve riba, and the Islamic banking bankers used the term for fear that lack of tax deductions available for interest would put them at a competitive disadvantage to conventional banks.

In 2009, the official newspaper of the Vatican put forward the idea that "the ethical principles on which Islamic banking finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service".

Some proponents believe Islamic banking has more far reaching purposes than conventional banking, and declare that the "guiding principles" for Islamic finance include: "fairness, justice, equality, transparency, and the pursuit of social harmony", although others describe these virtues as the natural benefits of following Sharia.

Nizam Yaquby, for example declares that the "guiding principles" for Islamic banking finance include: "fairness, justice, equality, transparency, and the pursuit of social harmony".

Taqi Usmani declares that Islamic banking would mean less lending because it paid no interest on loans.

However, since Islamic banking calls for rewarding delayed gratification in the form of "return on investment" on both profit-sharing and credit sales, Islamic scholars and economists have tended to insist that time value of money is a valid concept "provided the rate of discount is the 'rate of return' on capital rather than the rate of interest, " a position critics find specious.

At least some in the Islamic banking finance industry use derivatives and make short sales, and permissibility of this is a subject of "heated debate".

Islamic banking proposes that short term credit for the production sector of the economy, be estimated by the central banks and the provided by them by manipulating the "refinance ratio" and the "lending ratio".

The other difference is that the monthly payments by buyer in Islamic banking are rent and partnership buyout payments, and not return of principal and interest as they are in conventional banking.

Skeptics of the Islamic banking argue that the result is the same: the buyer makes monthly payments to own the house, much like a conventional mortgage.

In contrast to LIBOR, Islamic banking banks lend money based on their own reference rate known as the Islamic banking Interbank Benchmark Rate which "uses expected profits from short-term money and a forecasted return on the assets of the bank receiving funds".

In Islamic jurisprudence, Bai-muajjal, called bai'-bithaman ajil, or BBA, is a credit sale or deferred payment sale, i e the sale of goods on a deferred payment basis.

Nonetheless, as of 2012 Islamic banking banks using Tawarruq include the United Arab Bank, QNB Al Islamic banking, Standard Chartered of United Arab Emirates, and Bank Muamalat Malaysia.

In Islamic banking return is measured as "expected profit rate" rather than interest.

Islamic banking funds are professionally managed investment funds that pool money from many investors to purchase securities that have been screened for sharia compliance.

The options' Islamic banking distinctiveness has been questioned by analysts, and its use has been criticized by conservative scholars.

Mahmoud El-Gamal believes that from the 1970s to the 2000s there has been an evolution of the industry towards "progressively closer approximations" of the practices of conventional Islamic banking, approved by "progressively smaller" numbers of jurists.

Original Islamic banking proponents called for "keeping distinct accounts for various types of deposits so that return can be assigned to each type".

Inflation is a problem for financing where Islamic banks have not imitated conventional banking and are truly lending without interest or any other charges.

Sources differ over whether Islamic banking is more stable and less risky than conventional banking.

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Faisal Islamic banking Bank had difficulties and closed its operations in the UK for regulatory reasons.

The majority of Islamic banking clients are found in the Gulf states and in developed countries.

In series of interviews conducted in 2008 and 2010 with Pakistani banking professionals, economist Feisal Khan noted many Islamic bankers expressed "cynicism" over the difference or lack thereof between conventional and Islamic bank products, the lack of requirements for external Shariah-compliance audits of Islamic banks in Pakistan, shariah boards lack of awareness of their banks' failure to follow shariah compliant practices in or their power to stop these practices.

In one important part of the finance market – home buying – Islamic banking finance has not been able to compete with conventional finance in at least some countries.

Critic Feisal Khan argues that in many ways Islamic banking finance has not lived up to its defining characteristics.