Islamic Banking

The principle of Islamic banking

Group Members

Siti Zaleha bt. YusofNuruzziadah bt. Ahmad @ Mohamad

Na’imah bt. KassimShazatul Izwani bt. Sajahan

INTRODUCTION

Islamic banking provides services to its customers free from interest, and the giving and taking of interest have prohibited in all transaction. Islam bans Muslims from taking or giving interest (the Arabic term for which is Riba), and this prohibition makes an Islamic banking system differ fundamentally from a conventional banking system.

Islamic BankingIslamic Banking

• Islamic banking refers to a system of Islamic banking refers to a system of banking or banking activity that is banking or banking activity that is consistent with Islamic law (Sharia) consistent with Islamic law (Sharia) principles and guided by Islamic principles and guided by Islamic economics. economics.

• Islamic law prohibitsIslamic law prohibits , the collection , the collection and payment of interest, also and payment of interest, also commonly called Riba in Islamic commonly called Riba in Islamic discourse. discourse.

The Importance of Islamic Banking

• Modern banking, based on interest and biased in favors of the capitalists and rich and well-to-do, is rejected as un-Islamic because our country try to build a banking systems with the basic and being foundation by Islam.

• Islam as al-Deen is not just a religion but also a set of beliefs, thoughts and aspects of life that creates a balanced equilibrium between worldly (material) and spiritual elements

• Without an Islamic foundation the country will no get the blessing from the god in the world and the hereafter.

The basic principles of economy in Islam are

• Principle of the trust.

This principle implies the responsibilities of man towards his wealth and property. This will lead to the efficient economy resources allocation.

• Principle of liberty.

activities are freely performed based on the divine guiding sources of legislation and within the Islamic ethical values

• Principle of ownership.

The ultimate ownership belongs to Allah alone. This means Allah has created everything in a sense of belong collectively to the whole human society. However, Islam does recognize private ownership as well as public ownership in the interest of the community, but the public ownership will be given priority.

• Principle of justice

This will lead to a just distribution of income and wealth, mutual cooperation, equal opportunity, balance economic growth and development, and others.

• Principle of Tazkiyah

Tazkiyah in economy means that everyone earns and spends his earning legally.

• Principle of Ta’awun

Islam emphasize of cooperation rather than competition. This principle will lead to a harmonious life style of the society is helping with each other to achieve comforts and success.

Principles of Islamic banking

Individual freedom

Every individual enjoys full freedom of though, freedom of action and freedom

to earn livelihood in Islamic perspective. Islam always care about

the freedom of life without be concerned on the position of person

whether men, women, child, their race, and religion.

Right to property

All of people have the right on having the right gain the profit

on their own but meanwhile they must not left the poor people always remember to

well organize of their property always remember to pay a

zakat.

Equitable distribution of income and wealth

It lay down certain regulations for the maintenance of equity such as

distinction between lawful and unlawful means of income, right of free

enterprise for individuals and right to keep the lawfully earned wealth.

Social rights

Islam imposes social right over individual’s wealth in various

forms, for example the rights of kindred, rights of neighbors,

rights of the poor and spending in the way of Allah.

Principle of the ultimate ownership and the concept of

vicegerence

Allah is the creator and ultimate owner to the universe. These principles ensure the banks will fulfill the responsibility

of investing their own capital as well as others according to the syariah.

Principle of integrating every activity with the morale value

Ethical behaviors are one of the most important injunctions of the Islamic shariah. Islam does not only enjoin good ethical and moral behavior, it

strongly prohibits unethical and immoral behaviors of all sorts.

Principle of positive attitude towards economic growth and

development activities

The bank must aggressively and efficiently invest in energy activity, which leads to the

better economic environment.

The Golden Rule is that one has to be moderate in everything that one does. In all lawful acts, including devotional acts, one should neither be excessive nor deficient.

Principle of implementing profit sharing based system.

The shariah is of the view that money placed in a bank without being invested

should never increase but should, instead, decrease through the

obligatory payments of zakat each year.Islam does not accept that interest is a

legitimate means of profit-making because it is viewed as exploitative in

nature and encourages capitalism.

Principle of eliminating Riba from the economy.

The fundamental principle of Islamic banking rests on the doctrine of riba.

Literally, riba means an increase or excess. The laws of Islam strictly

prohibit and condemn any predetermined fixed increase or charge earned as a result of allowing the use

of one’s money by another.

Conclusion• As you may have realized, giving and taking interest is

unlawful. Our advice to anyone who is involved in any form of interest is that the individual should minimize his expenditure in these dealings and if possible abstain completely from these transactions.

• The shariah is of the view that money placed in a bank without being invested should never increase but should, instead, decrease through the obligatory payments of zakat each year

• Islam aims at establishing a system of equitable rather that equal distribution of wealth.

• Nevertheless, the rights of other individuals to get their freedom and the common good of society limit it and the code of legality (lawful and unlawful means of earning wealth) they must follow what have delivered by the prophet of Muhammad S.W.T

The End