Key concepts in Islamic banking

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Key concepts in Islamic banking

Islamic banks aim for the mainstream

Ways to lend without interest


Shari'a supervision: Where a specific subject is not mentioned in the Holy Quraan or in the teachings of the Prophet, interpretations can be made by Shari'a boards. Each bank offering Islamic finance has a board whose opinion is sought on intricate financial contracts and monetary instruments.

Prohibition of interest: In Shari'a law, there must be a marriage between money and work, initiative and risk that is just and equal. When a person lends money, the funds are used to create a debt or an asset. In the first case, Islam considers there is no justifiable reason why the lender should receive a return simply because he has made a loan. In the second, where money creates additional wealth, the question is why the lender should be entitled to only a small fraction (the interest) of the added value. The lender is a partner in the enterprise and not a creditor.

Istisna: A contract to acquire goods when the price is paid gradually as elements of the work are completed. This can be used for the payments to property developers or builders during construction.


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