Advantage And Disadvantage Of Islamic Banking

Islamic window is a concept introduced by Malaysian central (Bank Negara) bank where conventional banks also offer Islamic products beside conventional products in same environment by same staff. Initially, Islamic bank facing fierce competition from long establish conventional banking system. Islamic window introduction can reduce this since Islamic products also became a source of profit for conventional banks. A few conventional banks offering Islamic banking service under Islamic window has achieved an important volume of transactions in the Islamic window that they even set up Islamic bank subsidiary full fledge.

Becoming an expert in Islamic economics and finance field is one of my long-term goals in life. I started to organize and made a plan towards achieving that dream since senior high school. The concern towards Islamic economics and finance concept, and its application for society and the country began when I was reading a book entitled Islamic banking-theory and practice. After finishing reading the book, my interest in Islamic economic and finance topics rose and strengthen my own determination to become the expert of Islamic economics and finance. The main principle of Islamic economics and finance which offers the just and ethics in economic activity, poverty alleviation through income distribution mechanism, and prevention of economic and

Islamic banking is a structure that allows conducting banking activities and trades in line with the Islamic Shari’ah laws and principles by avoiding all the haram (prohibited) activity such as interest and financing prohibited businesses.

The main difficulties of applying IFRS in Islamic countries are driven by the difference treatments of interest. Under the conventional accounting, the interest is charged commonly as compensation to the lender, while under the Islamic law, Riba, which refers to the interest, is forbidden and considered as a major sin. Prohibition on charging interest gives rise to several different treatments in Shariah-compliant companies. For instance, in Islamic banking, due to the fact that the interest is forbidden with lending or depositing of capital, in order to prevent the default, the bank may ask for strict collateral, which refers to the concept of Murabahah. In general, Shariah-compliant companies conduct on the risk-sharing principle, while the traditional accounting is more rely on risk-transfer. (PwC,

Islamic Banking is quite similar to a conventional bank. Only here the essential feature is that it is Interest Free i.e. it purely follows the Islamic law – Sharia’h (Rules) and guided by the Islamic Economics that forbids the both the payment and the receipt of Riba (Interest). The two main principles are basically Banks will share the Profit & Loss (enabling risk sharing) and disallow Interest in any form.

Guidelines of Sharia' are genuinely clear and expound in characterizing the way of who are subject to pay zakah and who can advantage from zakah. The principal and important classification of potential recipients is the poor and the destitute. Therefore, Islamic microfinance organizations ought to have the capacity to prepare assets either through tolerating funds stores or acquiring reserves. This business approach involves charging and offering of benefits and is very predictable with Islamic Sharia'. Other than the procurement of different options for exploitable loaning by means of Islåmic Micrõfinance and it can permit the incorporation of the poorest by investment funds plans through wadiah and mudarabah stores, cash exchanges through zakat and sadaqah, and protection by means of takaful idea.

Home is an essential need for human life. Everybody needs an asylum for rest, rest, solace and assurance from sun and downpour. It is a spot to abide in solace with gang. In this manner, owning a decent home is a desire of everybody. Individuals satisfy this need by building a home all alone, buying it or leasing it from others. Undoubtedly, installment for home loan typically takes a decent piece of one's month to month pay. Customary home loans are, obviously, hobby based and prohibited in Islam. The most prominent kind of financing by every Islamic bank in Malaysia is Bai' Bithaman Ajil. Bai' Bithaman Ajil implies a "conceded installment deal". It is a method of Islamic financing utilized for property, vehicle, as well as financing of other

the First International Conference on Islamic Banking, held in Dubai in 1979, it has not been widely implemented throughout Islamic financial system (Bendjilali and Khan,1995, p. 16). It is a relatively new and very little used product available for Islamic banks. The paper claims that MMQ is more in line with Shari’ah teachings and as such should be used more by Islamic financial institutions. The study indicates that MMQ possibly has a comparative advantage for both financiers and the customer when compared with

Islamic banking is the banking system which runs in accordance with the Islamic laws and the Shariah board that guides the institutions. Apart from that, Islamic banking is an interest free banking, which there is no fixed rate of return. The Shariah board authorizes the production that whether these are Shariah compliant or not.

Islamic Capital Market is a major part of the overall Islamic Financial System especially in providing the component of liquidity to the otherwise illiquid assets. One of the most popular instruments used today in Islamic Capital Market is Sukuk. The structures of Sukuk based on Ijarah, Musharakah, Mudharabah and hybrid forms have evolved. Under any circumstances, these innovations have appeal to many Shari’ah issues and arguments. Therefore, this article aims at analyzing the challenges of realizing Maqasid al-Shari’ah in the Islamic capital market, focusing on sukuk instrument. In particular, this study evaluates on the approach of one of the most popular sukuk structure, namely, sukuk al-Ijarah in the light of the perspective of Maqasid

Islamic banking also provide the knowledge of Riba (interest) Hibha (gift) wadiah (safe keeping) ijarah ( lease , rent , wage) deposit product investment product and financing product (debt based) financing product (equity based ) trade finance

Almost 80% of respondents were non-Muslims. Therefore these research reports are mostly non-Muslim customer’s opinion on corporate banking Muslim. This study proves that Muslim banking products are not so popular among corporate customers in Malaysia and only a few maintain banking relationships under the Islamic banking system. In addition, nearly 65% of respondents indicated that their knowledge of Islamic banking system is very limited. This study shows that there is a misunderstanding among respondents regarding the objectives of Islamic banking. While 38.1% of respondents were uncertain about the nature of profit sharing system in Islamic banking, 50% believe that this principle is the only principle adopted by Islamic banks as a replacement Riba. Respondents were not familiar with other principles such as Musharakah, Ijarah, Wakala, and Istisna'a. Overall, the conclusions of the study are that there is a general knowledge that inadequate corporate banking products and services to Islam among

In addition, Islamic bonds are still far superior as compared to conventional binds, underpinned by the following factors: • Fairness and transparency. The financier and customer share the risks and rewards based on an agreed profit-sharing ratio. The roles and responsibilities of the parties to a contract are also explicitly disclosed and transparent. Asset-backed transactions. Islamic financial transactions must be backed by an underlying tangible asset or legitimate productive activity. This discourages over-exposure of the financing facility beyond the value of the underlying asset, and hence provides continuous security to the investors Ethical investment. Islamic finance prohibits the charging or paying of interest, and imposes restrictions on unethical and speculative financial activities

A bank as defined by BAFIA (Banking and Financial Institutional Act) is a person which carries on banking business. A bank is a financial intermediary that accepts deposits and channels those deposits into lending activities, either directly or through capital markets. Bank act as payment agents by conducting checking or current accounts for customers, paying cheques drawn by customers on the bank, and collecting cheques deposited to customer’s current accounts. In other word, bank is a financial institution which collects money as deposits from customers and uses the same to grant loans to other customers. It acts as a bridge between people who have surplus cash and pass it on to people who are in need of it. It pays an interest to deposit customers and receives an interest from loan customers and makes a profit through a difference in both.

Besides that, Islamic Banking is growing at a rate of 10-15% per year in this modern era with the signs of consistent future growth. Islamic banks have more than 300 institutions spread over 51 countries, including the United States