Or, like most people, did you believe that it was a banking system of Muslims, by Muslims, and solely for Muslims? Well, read on and you will see why, for an ever-increasing number of people today, nothing could be further from the truth. And why, irrespective of their religion or faith, more and more people are turning to the virtues of Non-Interest banking.
Since the beginning of the 18th century, banking has been conducted on an interest-based system of lending money to those in need. With no other alternative available, people had no choice but to borrow money at often high interest rates. This led to the formation of an unfair system that brought unnecessary hardship on people.
It was this need for a fair financial system that brought about the birth of Non-Interest Banking in the mid-1970s. Its objective was to provide a financial alternative that was fair, transparent and above all, a source of economic upliftment for all those in need.
Non-Interest Banking, emerged as a response to both religious and economic exigencies. It is an alternative financial system, operating within a framework that adheres to the tenet-based principles of Shariah (Islamic Law), thereby introducing a fair system of social justice and equality, while fulfilling the financial needs for people and maintaining high standards of ethics, transparency and a sense of responsibility.
If you thought the Non-Interest Banking and Conventional Banking are two sides of the same coin or if you believed there can be no banking without interest, we welcome you to the amazing world of Non-Interest Banking, where Interest Rates play no role. A banking system which is governed by a resilient code of ethics in all its practices and functions.
Non-Interest Banking is the first, where a customer, whether an individual or business is not just a customer but is a partner with the Bank or owner of goods and assets. This means they share the risks as well as the profits of such a partnership and ownership. This unique arrangement is done under the principles of Shariah (Islamic Law) which always ensures complete transparency.
Rather than opt for interest as a way of generating wealth, Non-Interest Banking is unique in the way that helps individuals as well as businesses build tangible and appreciating assets for themselves. This not only leads to prosperity founded on a solid economic base, but also encourages the spirit of entrepreneurship amongst its customers.
Partnership contracts have a fixed sharing ratio between the customer and the bank.
Partnership contracts where profits and loss are shared between the customer and the bank based on capital contribution.
Bonds & Guarantees.
Agency relations where the bank connects investors and customers/business seeking funds.
Trade Finance = Cost + Bank's margin
Agriculture Finance - Forward Sale Contract
Project Financing for Construction and Manufacturing
Part-fund purchase of assets over time
Sukuk - Direct asset ownership interest