Islamic Banking Advantages

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Islamic banks first started in the year 1963 in Egypt. Later, in 1970s, it had spread to other countries such as Dubai and Bahrain. It was established to fulfil the needs of banking system by Muslims that are in-compliance with the Islamic law (Shari’ah) as noted in one article that “Islamic law reflects the commands of God and this regulates all the various aspects of a Muslim’s life and hence Islamic finance is directly involved with spiritual values and social justices” (“Islamic Banking”, p. 2). Islamic banks have been growing rapidly since the last few decades not only in Islamic countries but also in European countries in which Muslims are minority. Muhammad Ariff (1998) claims “Islamic banking is not negligible or merely temporary phenomenon…show more content…
Muslims are not very aware about the sources of income they get if they put their money in the conventional banks. Hence, Islamic banks are the solution to this problem faced by Muslims. Some people still have the misperception regarding the Islamic banking products that are too similar to the products offered by conventional banks and refuse to change to Islamic banks. However, the concept of each of the financial products offered by Islamic banks are different from conventional. This paper aims to discuss the social benefits of Islamic banks that help Muslims by giving financial services that follow the Shari’ah principles, giving better distribution of income as well as promoting the principle of social…show more content…
However, some Islamic banks they charge a penalty on any late payment without reason in order to prevent the customers to take advantage on the bank. The penalty will not be considered as the income to the bank and it will be given out as charity. Qard loan is one of the financial assistances that is provided by Islamic banks where the borrower only pay the principal amount to the bank. It is compatible for students who are in need to finance their education. They could even change the loan to scholarship if they perform well in their studies. This is possible as Islamic banks have accumulated funds through all of the investments they made to be used to benefit the

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