1. Islamic banking is banking activity that is consistent with the principles of Sharia- Islamic law and participates actively in achieving the goals and objectives of an Islamic economy.
Sharia prohibits the interest-based transactions and Investing in businesses that provide goods or services considered contrary (vrazrez) to Islamic principles, for example alcohol, pork, gambling (igra na birze,azartnaja igra), or businesses that produce media such as gossip columns or pornography. The aim of this is to engage in only ethical investing, and moral purchasing. 2. Interest-free banking seems to be of very recent origin. The earliest references to the organisation of banking on the basis of profit sharing rather than interest are found in 1946.
In the next two decades interest-free banking attracted more attention, partly because of the political interest it created in Pakistan and partly because of the emergence of young Muslim economists.
In The early 1970s were held several conferences on Islamic Economics and banking. The involvement of institutions and governments led to the application of theory to practice and resulted in the establishment of the first interest-free banks.
The Islamic Development Bank, an inter-governmental bank established in 1975, was born of this process. It was set up with the mission to provide funding to projects in the member countries.
The efforts undertaken in the 1980’s to Islamize the economy at national level are considered as pioneering work in the Muslim world as this became important reference material for other countries which undertook the path towards introduction and establishment of an Islamic banking system. 3. Principles
How do Islamic banks reward their depositors since payment of interest is not allowed? Islamic rules on transactions have been created to avoid the prohobition. Islamic banking