Islamic Banking

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Islamic Banking

What is Islamic banking?

Islamic banking focusses on Islamic principles of the Sharia. This way of banking operates without interest, which is not permitted in Islam. Islamic banking prides on the concept that interest is income generated from money and is therefore seen as an effortless return.  

Basic differences between Islamic banking and regular banking

Foundation of banking system

Islamic banking is based on the principles of the Sharia (Islamic law) and steered by Islamic economy. These laws are the framework of Islamic finance.


Islamic banking promotes higher risk when investing.  Although money is deposited into the account for the purpose of gaining extra money, the amount is not guaranteed and will fluctuate.

When it comes to investing, regular banking is based on a fixed agreement and fixed monthly income. However, failure on Islamic investments are very rare, as the Islamic banks are very concerned about their users and go to extreme extends when deciding on investments.


Earning interest in the Islamic finance world is strictly forbidden. According to the Sharia, profit earned on money is an effortless return, thus enticing higher bank costs due to the possible increasing risks.  

Who charges higher fees?

Fees are always the number one question when it comes to banking. No matter what type of banking it is. Unfortunately, fees at any bank (Islamic or regular) depends on the bank itself. Just like competing businesses, different Islamic banks charge different fees.

But looking at the bigger picture, Islamic finance is the more expensive option simply because it caters directly to the Islamic user’s personal needs and is linked to their way of doing life. Where as with regular banking, it can be difficult to find banking options tailored according to your personal life and religious principles.

Islamic banking prides on their relationship with their consumers. It is not the average debtor-creditor relationship but more a business partner relationship as both the bank and the user shares in the risk due to the principle of no interest.

Can I bank with an Islamic bank if I am not a Muslim?

You do not have to be Muslim to bank with an Islamic bank, as long as you do not pose any objections to the principles of Islamic Financing. Many users have switched from regular banking to Islamic banking.

Let’s see why?

  1. Better consumer-banker relations.
  2. No fixed obligations.(No interest payments on deposits)
  3. Minimum need for maintaining high liquidity.
  4. Absence of interest can reduce prices of commodities.
  5. Deposit holders sometimes have a good chance to earn more than interest on their money.