1. What is Islamic banking ?

2. The products of Islamic banks.

3. Islamic vs conventional banking.

W H A T I S I S L A M I C B A N KI N G ?

Islamic banking is a banking system that is consistent with theprinciples of the Shari'ah (Islamic rulings) .

Shari'ah prohibits the payment or acceptance of interestcharges (riba) for the lending and accepting of money, as wellas carrying out trade and other activities.

“I S L A M I C” P R O D U C T S

Deposit products1.

2.

3.

4.

Investment products

Financing products

Insurance products

1 . D E P O S I T

In Wadiah, a bank is deemed as a keeper and trustee of funds. A persondeposits funds in the bank and the bank guarantees refund of the entireamount of the deposit, or any part of the outstanding amount, when thedepositor demands it.

A token given voluntarily by a debtor in return for a loan.

2 . I N V E S T M E N T

Refers to the sale of goods at a price, including a profit margin agreed to byboth parties, and clearly stated in the sale agreement/contract.

The bank cannot charge additional profit on late payments. However, theasset remains as a mortgage with the bank until the default is settled.

Is a contract, with one party providing 100% of the capital and the otherparty providing its specialized knowledge to invest the capital and managethe investment project.Profits and losses are shared between the parties according to a pre-agreed ratio. The profit is usually shared 50%-50% or 60%-40% for rabb-ul-mal.

2 . I N V E S T M E N T

This occurs when a person appoints a representative to undertaketransactions on his/her behalf, similar to a power of attorney.

is a written authorization to represent or act onanother's behalf in private affairs, business, or some other legal matter,sometimes against the wishes of the other.

Is the negotiation of a selling price between two parties without referenceby the seller to either costs or asking price. While the seller may or may nothave full knowledge of the cost of the item being negotiated, they are underno obligation to reveal these costs as part of the negotiation process.

2 . I N V E S T M E N T

refers to the Islamic equivalent of bonds. Sukuk securities are structured tocomply with the Islamic law and its investment principles, which prohibits thecharging interest. This is generally done by involving a tangible asset in theinvestment, such as by giving partial ownership of a property built by theinvestment company to the bond owner. The bond owner is then able tocollect his profit as a rent, which is allowed under Islamic law.

3 . F I N A N C I N G

Is a relationship between two parties or more that contribute capital to abusiness and divide the net profit and loss pro rata.-The profit is distributed among the partners in pre-agreed ratios.-The loss is supported strictly in proportion to capital contributions.

Refers to selling the benefit of use or service for a fixed price or wage.Under this concept, the Bank makes available to the customer the use ofservice of assets / equipment such as plant, office automation, motor vehiclefor a fixed period and price.

Ijarah thumma al bai’, Ijarah wal-iqtina’.

3 . F I N A N C I N G

Is a loan extended on a goodwill basis, with the debtor only required torepay the amount borrowed. However, the debtor may, pay an extraamount beyond the principal amount of the loan (without promising it) as atoken of appreciation to the creditor.

Is a contract in which the seller (bank) supplies a specific good to the buyerat a future date in exchange of an advance price fully paid at the time ofcontract. It is necessary that the quality of the commodity intended to bepurchased is fully specified leaving no ambiguity leading to dispute.

Bai' al 'inah (sale and buy-back agreement), Bai' bithaman ajil (deferred payment sale)

4 . I N S U R A N C E

Takaful is based on the idea that what is uncertain to an individual may cease tobe uncertain to a very large number of similar individuals. It’s a type of Insurancewhere members contribute money into a pooling system in order to guaranteeeach other against loss or damage.

I S L A M I C V S C O N V E N T I O N A L B A N K I N G

1. The oversight of a sharia boardA sharia board consists of Islamic scholars who are qualified to giveopinions on Islamic business contracts. In a commercial bank, the board isalso involved in supervising bank operations to make sure they comply withsharia principles. (Prohibiting usury, avoiding speculation and gambling,investing ethically.)

2. Investments in the bank-Investments in conventional commercial banks are based on guaranteedprincipal and earning a fixed amount of income.-In Islamic banking, the concept of investment is different : Although thecustomer deposits the money, the principal isn’t guaranteed and the bankisn’t liable to pay the money to its customer.

I S L A M I C V S C O N V E N T I O N A L B A N K I N G

3. Relationships with clients-In a conventional bank, the relationship between the client and the bankeris one of creditor to debtor; the bank has a responsibility to pay back yourmoney with or without interest according to your account contract.

-The relationship between a customer and an Islamic bank is completelydifferent; the debtor and creditor relationship does exist at times in Islamicbanking : It is a partnership.

P R E S E N T E D B Y : KARIM Oumaima