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Islamic Banking as a banking system that follows the ways of Islam - Essay Example
Finance & Accounting
Pages 10 (2510 words)
Islamic Accounting Table of Contents Introduction 3 Ijarah 3 Usage of Ijarah Contract in Islamic Financial Institutions 4 Similarities and Differences Between Conventional and Ijarah Leasing 6 Accounting Treatments for Ijarah 8 AAOIFI Standards and IFRS for Ijarah Contract 8 Conclusion 9 Introduction Islamic Banking involves a banking system that follows the ways of Islam…
As such, financial products are also designed according to such principles. Accumulating wealth is not against the law, but making money through unfair or fast means is not supported. Although Islamic banking is conservative in many ways, it is also safe. In Islamic banking, all transactions must be interest-free. There are several sets of rules for transactions, leasing, joint ventures, and partnerships. These laws are formulated with the Islamic religious sayings of the Quran and religious scholars in mind. In Islamic Banking, an Ijarah denotes the activity of leasing a property, is conducted by the bank. The bank takes possession of the property from its owner and leases it to a third party for rent; no interest is charged, as per the stated norms of Islamic banking. Even the maintenance cost is borne by the bank. The Islamic regulation is against making money through unfair means. For example, if the lessee pays a fine for late payment, the money goes to charity, not to the bank. Transactions in Islamic banking are considered Salam if the buyer pays the full amount to the seller. It is important that the buyer demonstrate that he is not in debt. Islamic banking offer many products that must be passed by the Shariah Supervisory Board. ...
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