Introduction to Islamic Banking

Abstract

Islamic banking has emerged as one of the most important alternate forms of funding in the financial world. There has always been a growing demand amongst Muslims for financial products and services that conform to the Syariah (Islamic law). The basic principles underlying Islamic banking transactions are that it must not be tainted with elements of interest and that risk must be shared between banker and customer based on a profit and loss sharing (PLS) principle. Islamic banking is not a new phenomenon and its principle was practiced during the time of Prophet (Saw). Islamic principles merged with creativity and innovation have evolved into a guideline for Islamic banking institutions to meet the financing needs of Muslims and Non-Muslims.