Islamic system of banking and finance

Islamic banking is a financial management system which runs in accordance with Islamic law. It shuns the element of interest in its transactions. Fundamentally an ethical mode of financial services, this system helps achieve the objectives of an Islamic economic system. Operations of an Islamic bank are based on Islamic principles of transactions in which profit and loss sharing (PLS) is a key feature, which is why Islamic banks are generally designated as PLS banks. There are many crucial aspects that are comprehensively discussed in this chapter. They include the main objectives of Islamic banks, the role of Islamic banks in economic development, and the essential features of Islamic banking. Important points such as the elimination of interest ( ribā ), investment of funds, multi-purpose financial institutions and careful evaluation of investment demand, are also discussed in this chapter. Finally, this chapter gives a detailed account of the prospects for Islamic banking and depicts a blueprint for an interest-free economic system.