Islamic Banking as a banking system that follows the ways of Islam Essay

Muslim Banking as a banking system that follows the ways of Islam - Essay ExampleAs such, financial products argon as well as designed according to such principles. Accumulating wealth is not against the law, yet making money through unsporting or fast means is not supported. Although Islamic banking is conservative in many ways, it is also safe. In Islamic banking, all transactions must be interest-free. There are several sets of rules for transactions, leasing, joint ventures, and partnerships. These laws are speculate with the Islamic religious sayings of the Quran and religious scholars in mind. In Islamic Banking, an Ijarah denotes the activity of leasing a property, is conducted by the bank. The bank takes possession of the property from its owner and leases it to a third party for rent no interest is charged, as per the stated norms of Islamic banking. Even the maintenance cost is borne by the bank. The Islamic ordinance is against making money through unfair means. For e xample, if the lessee pays a fine for late payment, the money goes to charity, not to the bank. minutes in Islamic banking are considered Salam if the vitiateer pays the full amount to the seller. It is important that the buyer demonstrate that he is not in debt. Islamic banking offer many products that must be passed by the Shariah supervisory Board. This board regulates and coordinates the operational activities of banking institutions functioning under Islamic banking rules (Hassan & Lewis, 2006, p. 1-4). Ijarah The term Ijarah refers to a lease, wage, or rent. It denotes the opportunity to habit an asset or service at a predetermined price or wage. Under this theatrical role of contact, the bank makes the asset available to the customers by lending them for a fixed time period and at a fixed price or rent. Ijarah is derived from the word Al Ajr, which means compensation, substitutes, or counter value. It involves transferring the usufruct but not the ownership, of the asset . In Islamic banking, the bank and the customers are involved in the lending contract. The bank transfers the usufruct to other person for a predefined period of time and consideration. Under Ijarah, the asset to be lent should be non-perishable and non-consumable. both assets that do not follow the criteria cannot be treated as subjects for lending. Ijarah is used in two distinguishable kinds of situations first, for providing services to other people in exchange for wages, and second, as hired services, where the employer is called musta jir and the employee is called ajir. The second situation deals with the lending of assets by banks to the third party in return for fixed rental charges from the party. Both types of Ijarah are formulated according to the laws of Islam. Ijarah is not only a mode of financing but also a medium for sales. This form of transaction is also followed in other, non-Islamic western countries (Ahmed, I. & Shabbir, n. d., p. 26). Ijarah wa Iktina In th is type of lease, the leasor enters into an agreement with the lessee and agrees to buy the property after the completion of the leased period. The contract can be terminated even originally the due date for the completion of the lease. The lessee can also buy the property before the date of commencement. The grease ones palms price is determined by the market value of the asset. Ijarah Thumma Al-Bai This combines both the contracts that are Ijarah, meaning leasing and Bai, which means the bargain for of the asset. Ij