Islamic banking – is banking activity based on the principles of Sharia and finding practical use via development of Islamic economy.
What are the terms for conducting such activity?
Sharia prohibits receipt of settled interest or margin for a loan, regardless of type of these instalments: fixed or floating.
Investments in businesses that provide goods or services, which are contrary to Islamic principles (such as alcohol), are also prohibited.
While these prohibitions have historically been applied to varying degrees in the late twentieth century, several banks have been founded in order to apply the principles to private or semi-private commercial institutions in Muslim society.
By 2009, there were more than 300 banks and 250 mutual funds operating in accordance with Islamic principles in the world, and in 2014, total assets of 2 trillion US Dollars were Sharia-compliant. And according to data of 2014, financial institutions based on Sharia principles represented about 1% of total global assets.
In Uzbekistan, Islamic finance is represented by the projects of the Islamic Bank for development of the private sector, which has been successfully cooperating with Bank “Ipak Yuli” for a long time. Financing is carried out in form of providing banks with financing lines to provide guarantees under Murabaha principles. This is one of the most common methods of working for interest-free transactions, used by banks in Muslim countries. Murabaha – is an active client financing operation and is suitable for a wide variety of purchases: from equipment to buildings for business purposes.
The principle of its operation is simple: customer negotiates on terms of purchase of necessary goods and contacts the bank, which, in turn, buys the goods and resells it to the customer for deferred payment period adding its own margin.