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The functions of conventional banks rely on manmade principles, while the Islamic banks rely on the Islamic Shariah principles. The transactions, dealing, product features, business approach, responsibilities, investment focus and various other features are Shariah law leading to significant difference in regular operations in comparison to the conventional banking system.

The Islamic foundation is based on Islamic faith and is restricted within the Islamic law in its actions and deeds. ‘Shariah’ is an Arabic word and its actual meaning is ‘way to source of life’. This is now employed to legal system keeping the behavior code in respect to the Holly Quran.

The Islamic bank governing principles are the interest (riba) transactions absence. The economic activities (zulm) including cruelty are avoided, the economic activities (gharar) including speculation are avoided, the tax introduction (zakat) and goods and services contradicting Islamic value is discouraged (haram).

On the contrary, conventional banking is based on creditor-debtor relationship that comprises of depositors and bank and dealings go with borrowers and bank. Interest reflects the cost of money.

Islamic law offers loan free of charge to meet contingencies aiming that creditors do not take advantage from borrowers in lean times. In fact, money lent on interest is viewed as injustice.

Principles relating to financial transactions are that the capital is not rewarded unless it is exposed to risks in businesses. Financial intermediation is followed as per the Islamic framework.

The investor in conventional banking is given priority and is seen with great respect, besides is assured of rate of interest as per the predetermined reports. In contrast, the Islamic banking promotes risk between investor of the capital and its users.

Conventional banking focuses on maximizing profits and does that with full force to gain best profits without any sort of restrictions. Islamic banking aim only at maximizing profit, but restricts its activities to Shariah restrictions.

Islamic banking system is service oriented and has tax (Zakat) collection and pay out center, while the conventional banking refrain dealing with Zakat. The conventional banking system lend and get money with compounding interest and is the key function, while the Islamic banking participates in the business in the form of partnership.

The conventional banking system approves charging penalty and additional money from defaulters. The Islamic banks have maintained no such provisions to charge penalty from defaulters. They take small amounts as compensation and the same is given to charity. In fact, rebates are issued for early settlements.

Conventional banks are based on clients’ credit-worthiness, while Islamic banks emphasis on the projects viability. The relation of conventional banks with its clients is as debtors or creditors, while the Islamic bank client relations is as partners such as investors and trader, seller and buyer.

The Islamic laws are strict and one needs to make sure they abide on all the rules if they follow this religion. It mainly relies on the teachings of the prophet Mohammed and the message is found through the Islamic holy book called the Quran. Here, the followers get the daily teachings as well as find the laws they need to follow. When it comes to matters of insurance, one need to be very careful since this is supposed take care of matters that arise.

When one dies, all the money and property they have is sent to the family members if they have not left a will. When they die and they have left any form of debt, the total amount is given to the people they owe. This is the major rule in Islam that no one should die, leaving any debts and they need to make sure they have cleared all debts when they are alive or when they die, their families will take care of clearing the debt. This follows the pattern in most of the Western world, whereby the survivors of the person assume responsibility for any remaining debts.

How does Islamic Takaful apply?

Long ago, when the Arabs were trading, they decided to combine the funds in a mutual fund for insurance reasons. This was to benefit the people, who had difficulties in clearing the debts and they use the chance from the fund. Every member had the chance to take part in this trust and when they have passed on, the family gets the benefit. When people are trading, they end up taking loans and this mutual trust helped the traders in acquisition of capital. Through this fund, they would get all the assistance they need but when they have debts, the cash is deducted from their fund.

The work Takaful means to compensate each other and this made it easier for the traders to work along well together. This cut down on the lending costs and it built trust among the traders. When one takes time to invest in the fund, it makes it easier for them to deal with the other traders who are in the same mutual trust. This lead to the term insurance and compensation and one discovered who was safe to deal with amongst the other traders.

The Takaful made the Islamic traders close since they had to meet occasionally when they were dealing with an issue of compensation. When it comes to matters of trade and interest in the Islamic society, they are very strict and take time to deliberate on the issue. This method led to the emergence of trade in the Arabic world since it was easy for them to access the funds.

Takaful and insurance

Currently, this method is still going on in the Islamic countries but it has two pillars, which include the Mudarabah and Waqalah. They revolve around profit sharing and loss sharing especially in these days, where most of the Islamic countries are tied down to terrorism.

An Islamic forex broker

Many people are of the assumption that an Islamic forex broker deals with people who fall under this religion. This is not an actual reason and when you are opening a forex account, you are free to settle with any trading company you want and end up choosing the ideal and authoritative brokers.

When you decide on opening an account, you need specify if you want the Islamic account and this means you will operate under the no Riba trading account. This means that there are no interests from other parties, and the ideal channel of transacting the Islamic account is honored. In the Islamic laws, there are numerous rules when it comes to profits and interests. Many prefer to honor this pledge, hence the reason why there are specific Islamic banks and forex trading bureaus.

Well learned

When it comes to operating the forex account, the owner needs to learn and master all the details that pertains the duties of trading. Luckily, one does not need to go all through this sweat all thanks to the brokers. The broker has the capacity to understand the rules of operating the account. They also have the knowledge to know when the currency is declining. This means that the broker has the relevant information in honoring the rules of the Islamic code of conduct and is aware of the operational procedures.

Licensed

When taking on the investment approach, you need to make sure that you are dealing with fair and just brokers, justas you should with any type of broker. Some do not follow the rules to the letter and end up channeling the funds for other projects, which is probably not what you had in mind. Others use quite a lot of cunning and trade when the currency is at the competitive stage and there are higher chances of making huge losses. It is important to settle with the ones who are registered and give them the opportunity to transact this business. When you take the time to understand the different companies that offer the Islamic broker, they end up getting the efficient results which is your main aim in trading.

Settling with some of the recommended Islamic brokers gives you the opportunity to deal with some of the best traders in the industry. This is because many previous clients have used the services and have learned from experience that they will do a good job. This makes it much easier for one to have faith in investing the cash and end up settling with the best option without trial and error.

The Islamic politics system is dependent on the three rules of towhid (Oneness associated with Allah), risala (Prophethood) as well as Khilifa (Caliphate).

The Towhid:

Towhid signifies that one Allah only is the Master Creator, plus Sustainer of the universe along with of all, which exists in this – organic or even inorganic. He only has the rights to command or prohibit. Worship and obedience tend to be due to Him only. No aspect of existence in all of the its multifarious forms your own organs plus faculties the apparent manage which people have above physical objects or even the objects themselves are created or a obtained by people in the right. They’re the bountiful commissariat of Allah along with have been bestowed upon people by Him alone.

Therefore, it isn’t for people to decide the goal together with purpose of the existence in order to set the limitations of the worldly authority not does anyone else possess the right to create these decisions for people. This right rests exclusively with Allah. This rule of the Oneness associated with Allah creates meaningless the idea of the legal plus political sovereignty of humans. No individual, family members, class or race could set themselves over Allah. Allah only is the Ruler plus His commandments comprise the laws of Islam.

The Risalah:

Risalah is a medium through which people receive the laws of Allah. You have received two points from this resource: the Holy Quran, a book into that Allah has expounded the law plus the authoritative interpretation with exemplification of which Book through the Prophet Muhammad (PBUH), by word and deed, within his capacity like the representative of Almighty Allah. The Holy Quran laid down all the broad principles which human being life should be dependent plus the Allah’s Prophet, in accordance with such principles, established the model system of the Islamic life. The mixture of these two components is named the sharia (which means law).

The Khilifah:

Khilafah means the representation. Person in accordance with Islam is a representative of Almighty Allah on the planet, His vice-gerent that is to say through virtue of the strengths delegated to him through Allah plus within the limits recommended he’s required to practice Divine authority. In order to illustrate what it signifies, let’s consider the case of the estate of yours that another person has been appointed in order to manage on your behalf.

The four states of affairs invariably obtain. Initial, the actual ownership of any estate remains vested within you and not within the administrator; subsequent, he administers the property directly according to your instructions; third, he practices is authority in the limits prescribed with you; plus fourthly, within the administration of believe in the executes your will as well as fulfils your intentions not his own.
In conclusion, this is just what Islam means once this affirms that humankind is the representative (or khalifa) of Allah in the world. Therefore, these four conditions tend to be involved in the idea of Khalifah. The state that’s organized in accordance with such political theory will actually be a caliphate underneath the sovereignty of the Allah.

Banking is a sector on which the economy of a country depends. No country can achieve glory without having a sound banking system. Islam has given us all the guidelines to follow in every aspect of life. It is the case in banking. Islam has put in front of us certain conditions that are to be  followed while doing banking.

Islam is the set of most beautiful and balanced principals for life of any individual. according to the true Islamic faith, accumulation of wealth is not at all supported. Islam believes in keeping the funds or money in circulation and there are many golden rules that one can follow for the creation of perfect society that is free of poverty and discriminations. One of the aspects of this beautiful religion is Islamic way of investing in business and earning profit. On all the profit one earns and all of his possession including gold and silver there is 2.5% obligatory deduction called zakat. Every earning person is liable to pay zakat to the needy and poor. In this way, the foundation of healthy society is laid where everyone is happy, fed and at peace. Another beautiful aspect of Islamic thought is to invest in interest free system and lay the stone of interest free banking.

The first thing that should be kept in mind is the involvement and use of interest in banking. In Islamic banking, it is totally forbidden and the banking is done according to the principles laid down by Islam. All the products and also the lending and borrowing activity is free of interest in Islamic banking. Other concepts were evolved to ease the customers, which include the concept of partnership in which a person gets entitled to the property as a legal partner rather than earning interest on that. This is useful for both the lender and the borrower and the cycle continues in a precise way.

Before the introduction of Islamic banking, many Muslims were quite reluctant to use the banking system for doing investment as it involves the phenomenon of interest. So to cater and handle the needs of the Muslims Islamic banking was introduced, which has now become popular not only among the Muslims but also among non-Muslims as well. The reason for this is that it works on the golden principles of equity and fair play, which inspires everyone regardless of the cast and creed.
Various forms of partnerships have been launched under the scheme of Islamic banking, which includes “Mufawada” and “Mudaraba”. Mudaraba is the form of partnership, which provides the person with limited entitlement of the asset. Therefore, this type of partnership in Islamic banking is sometimes called as the partnership of limited liability.