this is the research article about concept of islamic banking that is an alternate to conventional banking. Drawbacks of conventional banking and aspects of islamic banking.

1. Assignment
Submitted to Sir Fida
Submitted by Urooj Fatima
Semester 3rd (Morning)
Section B
Session 2018-2022
Subject English
Department Zoology

2. Concept of Islamic Banking: A True
Alternative to Interest Based Conventional
Banking

3. Introduction
• Banking in conventional sense is the process of accepting, , for the purpose of
lending or investment, of deposits of money from the public, repayable on demand.
• The principal function of a Bank is to bring into a common pool of idle money of
the general public, for the purpose to gain a return in the form of interest, fee and
dividends in making advances and providing services to others.
• Interest(Riba) is strictly prohibited in Islam and hence there can be no banking
system in Islam as Interest.
• An Islamic bank is a financial institution which identifies itself with the spirit of
Shariah, as laid down by the Holy Qur'an and Sunnah, as regards its objectives,
principles, practices and operations.

4. • Islamic banking has made it possible to keep the people away from the interest as
well as to address all the banking needs simultaneously and has become an ideal
alternative to the interest-based conventional banking worldwide.
• Interest free element is the distinguishing feature of Islamic banking, apart from
two elements being vital in Islamic Banking i.e. equal distribution of income and
wealth, and increase in equity participation of economy.
• Islamic banking because of its value-orientated ethos enables it to draw finances
from both Muslims and non-Muslims alike.

5. Research Objective
• How Islamic banking system is different from conventional banking system?
• What are the main aspects of Islamic banking?
• What are the drawbacks of conventional banking system?

6. Literature Review
• Evolution of Islamic banking:
1. Started from Egypt due to efforts of Ahmed El Najjar in 1963, 'Mit-Ghamr Islamic
Savings Bank (MISB) established, this bank is regarded as the first Islamic bank in the
world (The Financial Express, 2015).
2. In 1971, Nasir social bank was established and named as interest free commercial bank.
• Prohibition of Riba is the fundamental governing principle of Islamic Financing and this is
stated in the Qur’an.
“Those who devour Riba (Interest) will not stand except as stands one whom devil hath driven
to madness by (his) touch”.(Surah Al Baqarah 2:275)

7. • Riba is forbidden because it (a) corrupts society, (b) implies improper appropriation
of other people's property, (c) acts such a way which ultimate effect is negative
growth, (d) demeans and diminishes human personality, and (e) is unjust (Siddiqi,
2004).
• Narrated by Jabir ”: The Prophet cursed the receiver and the payer of interest, the
one who records it and the two witnesses to the transaction and said: "They are all
alike [in guilt]. (Muslim 3;1219)
• Islamic banks do not allow or assist in any excessive risky work like 'Gharar' or
'Mysir' as they are not Shariah compliant and forbidden in Islam for their excessive
risk or absolute uncertainty (Arman, 2013).

8. Research Methodology
• Qualitative research
• Document analysis
• Descriptive research
• Based on prior literature and secondary information

9. Refrences
• Justice Muhammad Taqi Usmani, 1998, ‘The Adverse effect of interest on Society’.
• Mahnmoud Amin El-Gamal, 2000, ‘A Basic guide to Contemporary Islamic
Banking and Finance’.
• M. Muslehuddin Dr. 2008, ‘Banking and Islamic Law’.
• Official Website of Institute of Islamic Banking and Insurance
• M. and Khatun, M. (2013). The compliance with Shariah Governance system of
AAOIFI: A study on Islamic Banks Bangladesh
• Akbar C. S. (31 March 2015). Islamic banking: History and development, The
Financial Express.