What exactly is Islamic Banking? Contact [email_address] (+34) 902 013 525
Definition: A system of banking or banking activity that is consistent with the principles of the Shari'ah (Islamic rulings) and its practical application through the development of Islamic economics.
Purpose: Islamic banking has the same purpose as conventional banking except that it operates in accordance with the rules of Shari’ah, known as Fiqh al-Muamalat (Islamic rules on transactions
Equity partnership (profit and loss sharing)
Checks and balances to maintain ethics and justice
Profit is the chief motivation
Not inherently micro-financing-friendly
Not enough checks and balances which can lead to excess, causing economic meltdowns
the banking system has to avoid interest.
there should be no reward without risk-bearing.
Islam views true profit as a return for entrepreneurial effort and objects to money being placed on a pedestal above labour, the other factor in production.
Why prohibit interest?
The prohibition on paying or receiving fixed interest is based on the Islamic tenet that money is only a medium of exchange, a way of defining the value of a thing
Money tends to be viewed purely as a medium of exchange .
In order for an Islamic bank to earn a return on money lent, it is necessary to obtain an equity, or ownership, interest in a non-monetary asset. This requires the lender to also participate in the sharing of risk.
transactions involving excessive uncertainty
all forms of gambling
Financing Modes of Islamic Banks
all financial arrangements that the contracting parties agree to use are lawful, as long as they do not include an element of interest. Equity-holding and commodity and asset-trading are an integral part of Islamic financing.
The two basic categories of financing are :
profit-and-loss-sharing (PLS), also called participatory modes, i.e., musharakah and mudarabah and
purchase and hire of goods or assets and services on a fixed-return basis, i.e., murabaha, istisna'a, salam and leasing.
What’s the status of Islamic banking?
It is no longer a novel experiment
Islamic banks are evolving financial and investment instruments that are not only profitable but are also ethically motivated.
There is a risk that Islamic banking ideals may get diluted with conventional banking unless Islamic banks do something to establish their distinctness as “Islamic banks”.
T he services that the Kinos Group can offer to the investors from these countries range from attracting investors for the Middle Eastern Arab countries to assistance in channelling their capital to assets and companies in strategic economic sectors of Spain and Latin America.
T he Kinos Group has continued devleoping its relations with Islamic investors. The Kinos Group has had fruitful collaborations with Arabic investment funds for two years, starting with Royal Group, Abu Dhabi Investment Authority, Investment Corporation of Dubai and Mubadala Group.