Islamic Banks - Bader Al Mulla

In Islamic banking they refer to the Shari’ah for their principles and way of banking. The Shari’ah prohibits or forbids the payment of charges or interests for the rented money or loan, charging interests on loans is considered to be riba in Islam, also Islamic Banks do not allow investments in Haram (forbidden) industries such as casinos, hotels which serve alcohol drinks, and many more. The principles were used as the root for a thriving economy in earlier times but by time these principles were left out or was forgotten, and it is only in the 20^th century that a sum of Islamic banks were formed to apply these principles to private and semi-private commercial institutions within the Muslim community. Islamic banking use many different products, some of these products are mudharabah a profit sharing product, wadiah a safe keeping product, musharakah a joint venture product, murabahah a cost plus product, and ijarah a leasing product. Each of these products differentiates Islamic banks from conventional banks.

Islamic banks in UAE are booming and the economy strengthened because of the Islamic banks. Oxford Business Group in collaboration with Abu Dhabi Islamic Bank published a report which showed or revealed the growing demand for Islamic financial services among different customers within the UAE. The report also highlighted that the Islamic banking sector had a very important role in promoting and helping the economy in its growth.

There are differences between Islamic and conventional banks. In conventional banks they charge some interests on their loans, while in Islamic banks they take profits from their customers while financing to them. Also conventional banks does not deal with the Zakat, in the other hand Islamic banks nowadays become one of the service oriented functions in collecting Zakat and also they pay out their Zakat. Another difference is conventional banks has to guarantee all its deposits, but in Islamic banks they only guarantee deposits for deposit accounts, therefore depositors are guaranteed repayment of their funds. One more difference is that the status in conventional bank in relation to its clients is that of creditor and debtors, while in the Islamic bank the relation to its clients is that of partners, investors, and trader buyer and seller.