Islamic Banking System as an effective element of economy

Abstract

Abstract: The main goal of this paper is to present what the Islamic banks (the type of banks governs by Islamic law that governs every aspect of Muslims’ life “Shariah”) instruments are and why it is so important for the community. According to Shariah the payment or acceptance of interest charges (Riba) is prohibited in Islamic banking transactions. This paper is tried to describe the main features of the Islamic banking transactions and to identify the differences between Islamic and conventional banks. Also, this paper presents a survey of the historical evolution of the Islamic banking system in Muslim countries, starting with the first Islamic bank, early in the 1960’s, Nasser Bank in Egypt. In conclusion, the Islamic banking system is a rapid growth one and the switch to Islamic banking will be a difficult task. Due to the fact, that in the last decade, the Islamic banking made its presence in all over the world markets not just in Islamic countries. Keywords: Islamic Banking, Islamic Finance, Riba, Islamic Instruments