Guide to Islamic Banking

About Islamic Banking

A few decades ago, developing contemporary banking and financial institutions that encompass Islamic values within their core principles and practices seemed to be unachievable. Today, however, Islamic banking has become a viable financial approach that attracts an increasing amount of capital investment at annual rates that vary between 10% - 15% with signs of consistent growth. As it continues to penetrate new and emerging markets every year, Islamic Banking services were first introduced in the Republic of Maldives in March 2011 by Maldives Islamic Bank. readmore


Although it draws its fundamental values from practices and core principles that go back centuries to the dawn of Islam, contemporary Islamic Banking started in the early 1960s concurrently in Egypt and Malaysia. In 1962, the Hajj Fund, TABUNG HAJI, was established in Malaysia to accept saving deposits from persons who intend to go for Hajj (pilgrimage) in Makkah and invest the proceeds in accordance with the Islamic law. readmore

What is Riba and Interest

The word "Riba" means excess, increase or addition, which correctly interpreted according to Shariah terminology, implies any excess compensation without due consideration (consideration does not include time value of money). readmore

Basic Principles

There are at least six basic principles that differentiate a financial transaction from a Riba/interest based transaction to an Islamic banking transaction. readmore

Difference between Conventional and Islamic banking

In Islamic Banking, money is not a commodity though it is used as a medium of exchange and store of value. Therefore, it cannot be sold at a price higher than its face value or rented out. readmore

What is Mudarabah

A form of partnership where one party provides the funds while the other party provides expertise. The people who bring in money are called "Rab-ul-Maal" while the management and work is an exclusive responsibility of the "Mudarib". readmore

What is Murabaha

Murabaha is one of the most common modes used by Islamic Banks. It refers to a sale where the seller discloses the cost of the commodity and amount of profit charged. Therefore, Murabaha is not a loan given on interest rather it is a sale of a commodity at profit. readmore