ISLAMIC AND NON ISLAMIC BANKING

Islamic Banking Systems and Non Islamic Financial Institutes



Islamic Banking Systems and Non Islamic Financial Institutes

Chapter 1: Introduction

Islamic Banking & finance has been globally experiencing a renaissance over the last decade. It has received overwhelming response from across the globe as one discovers its ideological dimensions and practical richness and significance.

Starting from the very basic of Islamic teaching & philosophy, Islamic Economics thoughts accept that every human being needs involvement in some kind of economic activity for survival and it is a legitimate right for every individual. Thus Islam has provided a complete economic model for establishing a just & fair society. The economic system presented by the Prophet (SAW) is very practical. It allows right relations between the employer and the employee, accepts the laws of market forces (Demand and Supply), recognises personal profit and free trade

Problem/Objective

The objective of this research is to identify the attitudes of bank clients toward Islamic banking and to determine the factors that will encourage or limit the growth of Islamic banking in the coming five years.

Importance of Problem

In the decade of the 1990s, a variety of changes took place in the Middle East. To start with, the technological revolution that swept the world during this period had a very significant impact on financial markets, both in world financial markets and in the region, and also allowing for many non-traditional forms of financial institutions and services to evolve. In addition to this, the period at the end of the 1990s, and especially following the events of September 11, witnessed the growing strength of Islamic influence on business and finance in the Middle East, particularly as many Arab and Muslim investors started to pull their funds out of American and other western banks and institutions to invest them at home. More importantly, however, Islamic banks are on the rise today because the growing body of research that shows Islamic banking to be as competitive, attractive and profitable as conventional banking if not more. In the coming few years, millions of Muslims will be searching for Islamic banks and banking services to process and invest their money in line with the Islamic shari'a, especially that non-traditional banks are not capable to satisfy such a need as these conventional banks are based on the concept of interest which is prohibited by Islam. In an Islamic deal, rather than of loaning the purchaser cash to buy the piece, a bank might purchase the piece itself from the trader, and re-sell it to the purchaser at a earnings, while permitting the purchaser to pay the bank in installments. However, the bank's earnings will not be made explicit and thus there are no added punishments for late payment. In alignment to defend itself against default, the bank inquires for firm collateral. The items or land is listed to the title of the purchaser from the start of the transaction.

Research, is therefore needed in order to identify the strengths and weaknesses of Islamic banks to ...