Have you heard about islamic banking? It is one of popular banking institution that being introduced from many bank especially in Malaysia. Islamic banking is a banking system that follows Shariah (Islamic law) principles. It is guide by Islamic economics and prohibits ‘riba‘ (collection and payment of interest), usury, trading in financial risk and haram (unlawful) business ventures.
In Malaysia, customer have the opportunity to choose between the conventional or Islamic banking system. There are many banks in Malaysia that are solely Islamic and some of the conventional banks also set up divisions that specialise in Islamic banking.
The purpose of Islamic banking is similar to conventional banking except that Islamic banking operates according to Shariah rules on transactions known as Fiqh al-Muamalat.
The basic principles of Islamic banking are the sharing of profit and loss and the prohibition of riba. Amongst the common Islamic concepts used in Islamic banking are profit-sharing(Mudharabah), safekeeping(Wadiah), joint-venture (Musharakah), cost-plus(Murabahah) and leasing (Ijarah). In Malaysia, Islamic banking has been monitored by the National Shariah Advisory Council set up by Bank Negara Malaysia (BNM). The banks that offer Islamic banking products and services are required to established their own Shariah advisory comitte or appoint consultants to advise them and ensure that their operations and activities comply with Shariah principles.
Source :- Money Sense – Getting Smart With Your Money from AKPK