Sunday, March 22, 2009

Islamic banking ~banking system of tomorow ?

Islamic banking is a reality in Mauritius, uk, switzerland, arab countries and many other occidental countries. Mauritius Leasing has started it's Islamic Banking programs this week in Mauritius divided into Operationing Lease and Finance lease.
What is Operating Lease ??
An operating lease is a lease whose term is short compared to the useful life of the asset or piece of equipment (an airliner, a ship etc.) being leased. An operating lease is commonly used to acquire equipment on a relatively short-term basis. Thus, for example, an aircraft which has an economic life of 25 years may be leased to an airline for 5 years on an operating lease. ( from wikipedia.org)
What is Finance Lease ??
A finance lease (also called a capital lease) effectively allows a firm to finance the purchase of an asset, even if, strictly speaking, the firm never acquires the asset. Typically, a finance lease will give the lessee control over an asset for a large proportion of the asset's useful life, providing them the benefits and risks of ownership. ( from wikipedia.org)

I had long ago done a deep research on Islamic banking 2 years ago which u can consult here : link

What are the Main PRINCIPLES of islamic banking ?? I wont go into quranic verses but will resume the main principles here:
  • the absence of interest-based (riba) transactions;
  • the avoidance of economic activities involving speculation (ghirar);
  • the introduction of an Islamic tax, zakat;
  • the discouragement of the production of goods and services which contradict the value pattern of Islamic (haram).. business of pork, wine, alcoholic drinks, all things haram.
Good projects which might be turned down by conventional banks for lack of collateral would be financed by Islamic banks on a profit-sharing basis. It is especially in this sense that Islamic banks can play a catalytic role in stimulating economic development.


Main Advantage of Islamic Banking system ??

Islamic banking banks have NOT been affected by the sub prime crisis which has become a world wide crisis. Banks involved in Islamic Banking has not lost even 1 pence in that crisis.
Because they do not allow speculation on money, because they do not give money just on an interest basis, but invest in businesses with a risk sharing program. This is why islamic banking system has survived and is flourishing the last 2 years while conventional banking systems have been deeply affected and are causing so much trouble to the WHOLE wOrLd.

Digg!

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