Ummul Wara Shakera
Session: 2016-17
Department of Accounting
Islamic banking system is such a type of banking
system, which is directed according to the rules of the Holy Qura’n and Sunnah
where transaction based interest is completely prohibited..Muslims are
encouraged in financial transactions as an essential part of their lives as Allah
(ST) declares:
‘’And when the prayer is finished, then may you
disperse through the lands, and seek of the bounty of Allah; and remember Allah
frequently that you may prosper.’’
Islamic banking refers to a system of banking or
banking activity that is consistent with Islamic law (Shariah) principles and
guided by Islamic economics. In particular, Islamic law prohibits usury, the
collection and payment of interest, also commonly called riba in Islamic
discourse. Generally, Islamic law also prohibits trading in financial risk
(which is seen as a form of gambling). In addition, Islamic law prohibits
investing in businesses that are considered haram (such as businesses that sell
alcohol or pork, or businesses that produce un-Islamic media). Islamic banking
system established economic justice, rationality, efficiency and progress.
According to Al-Quran, Allah has approved trade
and prohibited usuary (riba).This is the basic verse towards Islamic banking.Islamic
banking system is based on profit and loss sharing system due to the
prohibition of riba in the Holy Qur’an. Islamic banking has the same purpose as
conventional banking except that it claims to operate in accordance with the
rules of Shariah, known as Fiqh al-Muamalat (Islamic rules on transactions).
Usually Islamic Banks collect deposits in two
ways-
1. Al-Wadiya (Current Account)
2. Mudaraba (Savings Account which implies
sharing profits based on agreement)
Al-Wadiya System:
Al Wadiya system under Islamic shariat arises
when a person keeps his property with another person for safekeeping allowing
him to use it without the intention of receiving any return from it. Islamic
banks form their fund by collecting deposits from people through opening
current account which is based on Al-wadiya system
Mudaraba System
Mudaraba" is a special kind of partnership
where one partner gives money to another for investing it in a commercial
enterprise. The capital investment comes from the first partner, who is called
the "sahib-ul-mal", while the management is the exclusive
responsibility of the other party, who is called the "mudarib".
The Mudaraba (Profit Sharing) is a contract, with
one party providing capital and the other party providing its exertion and
knowledge to invest the capital and manage the investment project. Profits
generated are shared between the parties according to a pre-agreed ratio.In
Mudaraba only the lender of the money ("rabb-ul-mal") may incur a
loss.
As Islam allows to buying
and selling, there are different types of investment systems according to
Islamic shariat which are conducted by Islamic banks.
Some of these systems are
explained below-
Murabahah (Cost Plus)
This concept refers to the
sale of goods at a price, which includes a profit margin agreed to by both
parties. The purchase and selling price, other costs, and the profit margin
must be clearly stated at the time of the sale agreement. The bank is
compensated for the time value of its money in the form of the profit margin.
Bai-al- Salam (Deferred
delivery):
Bai Salam means a contract
in which advance payment is made for goods to be delivered later on. The seller
undertakes to supply some specific goods to the buyer at a future date in
exchange of an advance price fully paid at the time of contract.
Bai-al-Muajjal (credit sale)
Literally bai' muajjal means
a credit sale. Technically, it is a financing technique adopted by Islamic
banks that takes the form of murabahah muajjal. It is a contract in which the
bank earns a profit margin on the purchase price and allows the buyer to pay
the price of the commodity at a future date in a lump sum or in instalments.
Bai-al-Istisna
When a manufacturer, an
artisan or a craftsman takes orders with or without advance payment for
manufacturing the articles himself or through hired labourers, the arrangement
is known as Bai-al-Istisna. Istisna’a can be used for providing the facility of
financing the manufacture or construction of houses, plants, projects, and
building of bridges, roads, and highways.
Musharakah (joint venture)
Musharakah is a relationship
established under a contract by the mutual consent of the parties for sharing
of profits and losses in the joint business. It is an agreement under which the
Islamic bank provides funds, which are mixed with the funds of the business
enterprise, and others. All providers of capital are entitled to participate in
management, but not necessarily required to do so. The profit is distributed
among the partners in pre-agreed ratios, while the loss is borne by each
partner strictly in proportion to respective capital contributions.
Ijarah
Ijarah means lease, rent or
wage. Generally, the Ijarah concept refers to selling the benefit of use or
service for a fixed price or wage. Under this concept, the Bank makes available
to the customer the use of service of assets / equipments such as plant, office
automation, motor vehicle for a fixed period and price.
Islamic Banking has made significant progress
in Bangladesh during the last three decade. It has immense potential for
further expansion. As Bangladesh is a Muslim majority country, people are
getting influenced by religious and social beliefs towards Islamic banking. But
there is no separate act regulating Islamic banking industry in Bangladesh.
Moreover newly emerged Islamic banks offer Mudaraba deposit scheme with fixed
profit. In fact they are just masking the traditional interest based model in
the name Islam. So it is imperative to develop proper legal framework for
controlling, guiding and supervising Islamic Banking.Besides more awareness is
required from the common people who will put their trust in a bank.
