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After its first introduction on experimental basis in a small town of Egypt in 1963, many
Islamic Banks, both with letter and spirit, were established in the Middle Eastern and
The growth of Islamic banking has been increasing ever since, not only in
Islamic Banking:
Islamic banking has been defined as banking in consonance with the ethos and value
system of Islam and governed, in addition to the conventional good governance and risk
management rules, by the principles laid down by Islamic Shari’ah. Interest free banking
practices and participate actively in achieving the goals and objectives of an Islamic
economy
A depositor in an Islamic bank can therefore make earnings on his or her deposit in
several ways:
o Through return on his capital when that capital is employed in a business venture.
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o Through sharing of profit when his capital is par of capital is employed in a
partnership, and finally,
o Through rental earnings on an asset that has been partially financed buy his capital.
Like conventional bank, Islamic bank is an intermediary and trustee of money of other
people but the difference is that it shares profit and loss with its depositors. This
difference that introduces the element of mutuality in Islamic banking makes its
depositors as customers with some ownership of right in it. Islamic banks are similar to
those of non-Islamic banks in that both offer similar
(financial) services and play a pivotal role in the economic development of their
societies.
But they are different in that Islamic banks, unlike non-Islamic banks, are bound to
Presently, there are six full-fledged Islamic banks operating in Pakistan. These banks