Islamic banking provides financial services that adhere to Islamic law and avoid interest. It differs from conventional banking by prohibiting riba, or usury. The three main principles of Islamic banking are profit and loss sharing, asset backing, and the avoidance of uncertainty. Islamic banks also emphasize ethical investing and equitable distribution of wealth.

1. Islamic Banking The principle of Islamic banking

2. Group Members Siti Zaleha bt. Yusof Nuruzziadah bt. Ahmad @ Mohamad Na’imah bt. Kassim Shazatul Izwani bt. Sajahan

3. INTRODUCTION Islamic banking provides services to its customers free from interest, and the giving and taking of interest have prohibited in all transaction. Islam bans Muslims from taking or giving interest ( the Arabic term for which is Riba ), and this prohibition makes an Islamic banking system differ fundamentally from a conventional banking system.

4. Islamic Banking Islamic banking refers to a system of banking or banking activity that is consistent with Islamic law (Sharia) principles and guided by Islamic economics. Islamic law prohibits , the collection and payment of interest, also commonly called Riba in Islamic discourse.

5. The Importance of Islamic Banking Modern banking, based on interest and biased in favors of the capitalists and rich and well-to-do, is rejected as un-Islamic because our country try to build a banking systems with the basic and being foundation by Islam. Islam as al-Deen is not just a religion but also a set of beliefs, thoughts and aspects of life that creates a balanced equilibrium between worldly (material) and spiritual elements Without an Islamic foundation the country will no get the blessing from the god in the world and the hereafter.

6. The basic principles of economy in Islam are

7. Principle of the trust. This principle implies the responsibilities of man towards his wealth and property. This will lead to the efficient economy resources allocation. Principle of liberty . activities are freely performed based on the divine guiding sources of legislation and within the Islamic ethical values Principle of ownership . The ultimate ownership belongs to Allah alone. This means Allah has created everything in a sense of belong collectively to the whole human society. However, Islam does recognize private ownership as well as public ownership in the interest of the community, but the public ownership will be given priority.

8. Principle of justice This will lead to a just distribution of income and wealth, mutual cooperation, equal opportunity, balance economic growth and development, and others. Principle of Tazkiyah Tazkiyah in economy means that everyone earns and spends his earning legally. Principle of Ta’awun Islam emphasize of cooperation rather than competition. This principle will lead to a harmonious life style of the society is helping with each other to achieve comforts and success.

9. Principles of Islamic banking

10. Individual freedom Every individual enjoys full freedom of though, freedom of action and freedom to earn livelihood in Islamic perspective. Islam always care about the freedom of life without be concerned on the position of person whether men, women, child, their race, and religion.

11. Right to property All of people have the right on having the right gain the profit on their own but meanwhile they must not left the poor people always remember to well organize of their property always remember to pay a zakat.

12. Equitable distribution of income and wealth It lay down certain regulations for the maintenance of equity such as distinction between lawful and unlawful means of income, right of free enterprise for individuals and right to keep the lawfully earned wealth.

13. Social rights Islam imposes social right over individual’s wealth in various forms, for example the rights of kindred, rights of neighbors, rights of the poor and spending in the way of Allah.

14. Principle of the ultimate ownership and the concept of vicegerence Allah is the creator and ultimate owner to the universe. These principles ensure the banks will fulfill the responsibility of investing their own capital as well as others according to the syariah.

15. Principle of integrating every activity with the morale value Ethical behaviors are one of the most important injunctions of the Islamic shariah. Islam does not only enjoin good ethical and moral behavior, it strongly prohibits unethical and immoral behaviors of all sorts.

16. Principle of positive attitude towards economic growth and development activities The bank must aggressively and efficiently invest in energy activity, which leads to the better economic environment. The Golden Rule is that one has to be moderate in everything that one does. In all lawful acts, including devotional acts, one should neither be excessive nor deficient.

17. Principle of implementing profit sharing based system. The shariah is of the view that money placed in a bank without being invested should never increase but should, instead, decrease through the obligatory payments of zakat each year. Islam does not accept that interest is a legitimate means of profit-making because it is viewed as exploitative in nature and encourages capitalism.

18. Principle of eliminating Riba from the economy. The fundamental principle of Islamic banking rests on the doctrine of riba. Literally, riba means an increase or excess. The laws of Islam strictly prohibit and condemn any predetermined fixed increase or charge earned as a result of allowing the use of one’s money by another.

19. Conclusion As you may have realized, giving and taking interest is unlawful. Our advice to anyone who is involved in any form of interest is that the individual should minimize his expenditure in these dealings and if possible abstain completely from these transactions. The shariah is of the view that money placed in a bank without being invested should never increase but should, instead, decrease through the obligatory payments of zakat each year Islam aims at establishing a system of equitable rather that equal distribution of wealth. Nevertheless, the rights of other individuals to get their freedom and the common good of society limit it and the code of legality (lawful and unlawful means of earning wealth) they must follow what have delivered by the prophet of Muhammad S.W.T

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