Islamic banking is a term that reflects banking business, which is not contradictory to Islamic law principles. Islamic banking is based on certain Islamic principles (hukum) before they are translated into practical operations. The most obvious feature of Islamic banking is that it denounces the practice of riba (usury or interest)
Malaysia’s Islamic Banking Act, Section Two defined Islamic banking as banking business whose aims and operations do not involve any element which is not approved by the Religion of Islam.
Other terminologies for Islamic banking:
Syariah banking, interest-free banking, muamalah banking,riba-free banking, lariba banking, no riba banking
MAJOR CONTRACTS FOR ISLAMIC BANKING
i) Musyarakah : joint-venture profit sharing
ii) Mudharabah : trustee profit sharing
iii) Bai Bithaman Ajil / Bai Muajal : deferred payment sale
iv) Murabahah : cost-plus sale
v) Ijarah : leasing
vi) Istisna : Sale by order
vii)Qardhul Hasan : Benevolent loan
viii) Wadiah : safe keeping
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