Islamic banking

Islamic Banking Principles –

 

There is sharia law of Islamic banking which is the law of Islam whereas the rules concerned with the transactions are known as Figh al-Muamalat. (The Principles of Islamic Banking, 2012) Some of the key principles are –

• Any predetermined payment is prohibited over the amount of principal.
• Making money from money is not at all adequate under the roof of Islamic banking.
• Speculation, Uncertainty and Risk is also prohibited.
• Investment should only be done over products of practices which are not forbidden.
• The bank must share the profit or loss which is coming out of an enterprise for which money was provided.  (THE PRINCIPLES OF ISLAMIC BANKING, 2012)

Relevance of Islamic Banking for UAE –

 

Islamic banking in UAE was started under the law of 1985 number 6 of article 1, 2, 3 and these articles governs the financial institute of UAE. (Islamic Bank in UAE, 2011) There are various strategies related to the relevance of the Islamic banking in UAE –

• The internal and external environment should be studied in order to identify the strategic management.
• It is important as it can evaluate the performance of the institute to make sure that the strategic plans are applied according to the plans.  (UAE represents 30% of global Islamic banking, 2012)
• It is also important for effective implementation of policies and plans.

Islamic Banking different from Traditional Banking –

 

Islamic banking is bit different from traditional banking as there are many rules and regulations which are followed in Islamic banking but not in traditional banking and vice versa. Some of the major differences are as follows-

·         Islamic banks are basically based on the religious beliefs that oppose interest on principal payment instead traditional banks are mainly based on interests inly. (Islamic and traditional banks)

·         Islamic banks care for their morals and values while making investment. For example, Islamic bank doesn’t invest in tobacco companies while traditional banks are mainly concerned about returns on investment.  (Difference Between Islamic Banking And Conventional Banking, 2012)

·         Islmaic banks keep social cause at top priotity while its not the case with traditional banks.

Bibliography

1.       Difference Between Islamic Banking And Conventional Banking. (2012). Retrieved November 20, 2012, from www.sooperarticles.com: http://www.sooperarticles.com/finance-articles/difference-between-islamic-banking-conventional-banking-173510.html

2.       Islamic and traditional banks. (n.d.). Retrieved November 20, 2012, from www.tiib.com: http://www.tiib.com/pages.aspx?id=130

3.       Islamic Bank in UAE. (2011). Retrieved November 20, 2012, from www.ukessays.co.uk: http://www.ukessays.co.uk/essays/finance/islamic-bank-in-uae.php

4.       The Principles of Islamic Banking. (2012). Retrieved November 20, 2012, from www.uabarablaws.org: http://www.uabarablaws.org/the-principles-of-islamic-banking/

5.       THE PRINCIPLES OF ISLAMIC BANKING. (2012). Retrieved November 20, 2012, from www.emiratesislamicbank.ae: http://www.emiratesislamicbank.ae/about-us/islamic-banking/principles

6.       UAE represents 30% of global Islamic banking. (2012). Retrieved November 20, 2012, from www.khaleejtimes.com: http://www.khaleejtimes.com/DisplayArticleNew.asp?section=business&xfile=data/business/2012/january/business_january520.xml