What is Islamic banking?

Question

No, it's not about terrorists.

If they are interest free, how do they make a profit? How do they run these banks?

Answer 1

a bank that do not charge interest to loans or give interest to depositors. They derieved their source of income from service charges, handling fees, etc. A depositor earns money or may lose some by entering an agreement with the bank that his money will be lended to a potential business propects, in the west , it is similar as entering into a mutual fund.The reason is, in islam, it is not godly that only one party will benefit in a business transaction from the expense of others. It should be that both parties should have the same condition of gaining or losing in a joint venture.
For lenders, the bank requires one to submit feasibility studies if the money he'll borrow will go into a legal business. The bank then "lends" the money in a joint venture contract, on agreed division of percentage, both having the risks of gaining or losing in the profit and lost sharing in a transaction..

Answer 2

Islamic bank is different from regular banks because it is not based on interest. It doesn't give any interest on the savings, rather it gives profit.

Interest is something that you will definitely get if you deposit money in bank, but in case of profit, you will get profit if profit is made by bank. Islamic banks don't give out interest based loans rather they provide capital for profitable businesses. The profit earned is shared withing the accounts in the bank.

Kainmochisan above answered nicely.

Answer 3

From the following site you can download a complete book on Islamic banking. One method of making profit is by investing the money, considering the customer as a partner. Any profits or losses will be shared by the customer.

http://islamic-finance.net/

Answer 4

It is a long story but to make it short it is the money transactions that are interest free. Banks make money by other means that are accepted in Islam because interest is not accepted in Islam and it is very harmful for people.

An example of how they do make money: if you are taking a loan they sell you a product that they have before (usually a mineral) in some price and re buy it from you with a cheaper price. This is one of the methods for them to make profit. so you can see that you won't pay any extra money you will pay only the initial amount you wanted to borrow

Answer 5

Islamic banking: Financial services that meet the requirements of the Shariah, or Islamic law. While designed to meet the specific religious requirements of Muslim customers, Islamic banking is not restricted to Muslims: both the financial services provider and the customer can be non-Muslim as well as Muslim. Also called Islamic finance or Islamic financial services.
A good site to go on will tell you clearly what the quran teaches about the banking system-
www.submission.org/islam/usury.html

Answer 6

No interest is charged on loans and current accounts. None is paid on savings & deposits. But not deposits that have been used or invested by the bank on the approval of the client. For these type of deposits the client recieves a % of the profits, something like dividents as per the terms of the deposit/contract.

Answer 7

Various banks offer special accounts to pander to Muslim extremists. There are certain rules about not being allowed to receive interest on an investment or borrow money.

In the UK some banks used to offer special mortgages for Muslims. The bank would purchase a house and rent it to the Muslim until after a certain number of years they would give the house to them.

It's really just a scam. It's a way of bending the rules to appear to be complying with their faith.

Answer 8

an islamic bank, is a bank as others, but in rules, it doesn't take your money if you have any at bank, and respects the islamic rules as I said, for example, if you put 10 000 $ and you back after 1 year, you will find 10 000 $, no changes, and if you take a credit, for example 20 000 $, they will take only 20 000 $, so it's one of the good banks, and everyone likes to be in business with this kind of banks

Answer 9

In Islam it is forbidden to speculate to gain interest by investing in shares or options.
Therefor they have their own bank system that just keeps your money but doesn't lead to profit

Answer 10

a bank for Islamic people i guess