Editing Islamic banking and finance (section)

==Principles==
To be consistent with the principles of Islamic law ([[Sharia]])—or at least an orthodox interpretation of the law—and guided by Islamic economics, the contemporary movement of Islamic banking and finance prohibits a variety of activities, some not illegal in secular states:

* Paying or charging [[interest]]. "All forms of interest are ''[[riba]]'' and hence prohibited".{{sfn|Khan|2013|pp=xv-xvi}} Islamic rules on transactions (known as ''Fiqh al-[[Muamalat]]'') have been created to prevent use of interest. 
* Investing in businesses involved in activities that are forbidden (''[[haram]]''). These include things such as selling [[Khamr|alcohol]] or [[Islamic dietary laws#Pork|pork]], or producing media such as gossip columns or pornography.<ref>The Islamic Banking and Finance Database provides more information on the subject. {{cite web |url=http://www.wdibf.com/ |title=World Database for Islamic Banking and Finance |access-date=12 February 2015}}</ref><ref name=RIFI2004-5/>
* Charging extra for late payment. This applies to ''[[murâbaḥah]]'' or other fixed payment financing transactions, although some authors believe late fees may be charged if they are donated to charity,<ref name="Edward Elgar">{{harvnb|Visser|2009|loc="4.4 Islamic Contract Law"|p=[https://books.google.com/books?id=KIXe3rY_OkgC&pg=PA77 77]}}: "The prevalent position, however, seems to be that creditors may impose penalties for late payments, which have to be donated, whether by the creditor or directly by the client, to a charity, but a flat fee to be paid to the creditor as a recompense for the cost of collection is also acceptable to many fuqaha."</ref><ref name="kettell-38">{{cite book |url=https://books.google.com/books?id=lLVVRAqvZZIC&q=murabaha+impose+penalties+for+late+payment&pg=PA38 |title=The Islamic Banking and Finance Workbook: Step-by-Step Exercises to help you ...|date=2011|page=38 |publisher=Wiley|quote=The bank can only impose penalties for late payment by agreeing to 'purify' them by donating them to charity.|last1=Kettell|first1=Brian|access-date=9 July 2016|isbn=9781119990628}}</ref><ref name="al-yusr">{{cite web|url=http://www.alyusr.om/faq.aspx?id=15|title=FAQs and Ask a Question. Is it permissible for an Islamic bank to impose penalty for late payment?|website=al-Yusr|access-date=9 July 2016|archive-date=6 August 2016|archive-url=https://web.archive.org/web/20160806175919/http://www.alyusr.om/faq.aspx?id=15|url-status=dead}}</ref> or if the buyer has "deliberately refused" to make a payment.<ref name="IMF-2015-8">{{cite book|url=https://www.imf.org/external/pubs/ft/wp/2015/wp15120.pdf|title=IMF Working paper, An Overview of Islamic Finance|last2=Shahmoradi|first2=Asghar|last3=Turk |first3=Rima|date=June 2015|page=8|last1=Hussain|first1=Mumtaz|access-date=9 July 2016}}</ref>
*''[[Maisir]].'' This is usually translated as "gambling" but used to mean "speculation" in Islamic finance.<ref name="Economist-8-10-2014" /> Involvement in contracts where the ownership of a good depends on the occurrence of a predetermined, uncertain event in the future is ''maisir'' and forbidden in Islamic finance.
*''[[Gharar]]''. Usually translated as "uncertainty" or "ambiguity". Bans on both ''maisir'' and ''gharar'' tend to rule out derivatives, options and futures.<ref name="Economist-8-10-2014" /> Islamic finance supporters (such as Mervyn K. Lewis and Latifa M. Algaoud) believe these involve excessive risk and may foster uncertainty and fraudulent behaviour such as are found in derivative instruments used by conventional banking.<ref name="Lewis_and_Algaoud_(2001)">{{cite book |author1=Mervyn K. Lewis |author2=Latifa M. Algaoud |title=Islamic Banking |location=Cheltenham, UK and Northampton, MA, USA |publisher=Edward Elgar |year=2001}}</ref>
*Engaging in transactions lacking "'material finality'. All transactions must be "directly linked to a real underlying economic transaction", which excludes "options and most other derivatives".<ref name="RIFI2004-5">{{cite book |last1=El-Hawary |first1=Dahlia |first2=Wafik |last2=Grais |first3=Zamir |last3=Iqbal. |year=2004 |title=Regulating Islamic financial institutions: The nature of the regulated |series=World Bank policy research working paper 3227 |location=Washington, DC |publisher= World Bank |ssrn=610268 |page=5}}</ref>{{sfn|Khan|2015|p=89}}

Money on the most common type of Islamic financing – debt-based contracts – "must be made from a tangible asset that one owns and thus has the right to sell – and in financial transactions it demands that risk be shared." Money cannot be made from money.<ref name="nyt-review">{{cite news|last1=FASMAN|first1=JON|date=20 March 2015|url=https://www.nytimes.com/2015/03/22/books/review/heavens-bankers-by-harris-irfan.html?_r=0 |title=[Book Review] Heaven's Bankers by Harris Irfan|work=The New York Times|access-date=20 August 2015}}</ref> Another statement of the Islamic banking theory of finance is: "Money has no intrinsic utility; it is only a medium of exchange."<ref name="IIFTU1998:12">[[#IIFTU1998|Usmani, ''Introduction to Islamic Finance'', 1998]]: p.12</ref>{{sfn|Khan|2013|p=275}}
Other restrictions include 
*Islamic banks are to collect ''[[zakat]]'' (obligatory religious alms giving) from customers' accounts – at least according to some sources.<ref name="Lewis_and_Algaoud_(2001)"/><ref name="Nathan_and_Rebiere_(2007)">Nathan, S. and Ribiere, V. (2007). "From knowledge to wisdom: The case of corporate governance in Islamic banking". ''The Journal of Information and Knowledge Management Systems'', 37 (4), pp. 471–483.</ref>
* A board of [[Sharia]] experts is to supervise and advise each Islamic bank on the propriety of transactions to "ensure that all activities are in line with Islamic principles".<ref name="Lewis_and_Algaoud_(2001)"/><ref name="Nathan_and_Rebiere_(2007)" /> (Interpretations of Sharia may vary by country. According to [[Humayon Dar]],<ref name="Dar(2010)">Dar, Humayon A. 27 June 2010. "[https://web.archive.org/web/20210906115834/http://www.humayondar.com/businessasia4.pdf Islamic banking in Iran and Sudan]". ''Business Asia''.</ref> interpretation of the Sharia is more strict in Turkey or Arab countries than in Malaysia, whose interpretation is in turn more strict than the Islamic Republic of Iran. Mohammed Ariff also found less exacting Sharia-compliance in Iran where the Islamic government had decreed "that government borrowing on the basis of a fixed rate of return from the nationalized banking system would not amount to interest" and consequently would be permissible."<ref name="nine banks" /> Mahmud el-Gamal found interpretations most strict in Sudan and least in Malaysia.)<ref name="MeGIFLEP2006:21">[[#MeGIFLEP2006|El-Gamal, ''Islamic Finance'', 2006]]: p. 21</ref>
* Risk sharing. symmetrical risk and return on distribution to participants so that no one benefits disproportionately from the transaction.<ref name=RIFI2004-5/>{{sfn|Khan|2015|p=89}}

In general, Islamic banking and finance has been described as having the "same purpose" as conventional banking but operating in accordance with the rules of Sharia law (Institute of Islamic Banking and Insurance),<ref name="what-is-IIBaI">{{cite web |url=http://www.islamic-banking.com/what_is_ibanking.aspx |title=What is Islamic Banking? |website=Institute of Islamic Banking and Insurance |access-date=24 July 2016 |archive-url=https://web.archive.org/web/20160722181927/http://www.islamic-banking.com/what_is_ibanking.aspx |archive-date=22 July 2016 |url-status=dead }}</ref> or having the same "basic objective" as other private entities, i.e. "maximization of shareholder wealth" (Mohamed Warsame).<ref name="PoIFFaIS-2009">{{cite book|last1=Warsame|first1=Mohamed Hersi|title=The role of Islamic finance in tackling financial exclusion in the UK|date=2009|publisher=Durham University|page=183|chapter-url=http://shodhganga.inflibnet.ac.in/bitstream/10603/51331/10/10.chapter%204.pdf|access-date=23 August 2016|chapter=4. PRACTICE OF INTEREST FREE FINANCE AND ITS SIGNIFICANCE}}</ref> In a similar vein, Mahmoud El-Gamal states that Islamic finance "is not constructively built from classical jurisprudence". It follows conventional banking and deviates from it "only insofar as some conventional practices are deemed forbidden under Sharia."{{#tag:ref|"At least according to banking law in Kuwait 'the starting point in this formula' of Islamic banking 'is conventional financial practice, from which Islamic finance deviates only insofar as some conventional practices are deemed forbidden under Sharia.' ... Islamic finance 'is not constructively built from classical jurisprudence'. Rather, Islamic alternatives or modifications of conventional practices are sought whenever the latter is deemed forbidden. ... [[Ibn Taymiyya]] famously stated that two prohibitions can explain all distinctions between contracts that are deemed valid or invalid: those of ''riba'' and ''[[gharar]]''."<ref name=MeGIFLEP2006:8>[[#MeGIFLEP2006|El-Gamal, ''Islamic Finance'', 2006]]: p. 8</ref>|group=Note}}

A broader description of its principles is given by the Islamic Research and Training Institute of the [[Islamic Development Bank|Islamic Development bank]],

<blockquote>The most important feature of Islamic banking is that it promotes risk sharing between the provider of funds (investor) on the one hand and both the financial intermediary (the bank) and the user of funds (the entrepreneur) on the other hand ... In conventional banking, all this risk is borne in principle by the entrepreneur.{{sfn|Khan|2015|p=86}}<ref>{{Cite book |url=http://www.iefpedia.com/english/wp-content/uploads/2009/10/Challenges-Facing-Islamic-Banking-by-Ausaf-Ahmad-Tariqullah-Khan-Munawar-Iqbal.pdf |title=Challenges facing Islamic banking|last=Iqbal |first=Munawar|publisher=Islamic Development Bank|year=1998|pages=15–16}}</ref>{{#tag:ref|see also Hubar Hasan<ref name="MPRA-hassan">{{cite book|url=https://mpra.ub.uni-muenchen.de/58059/1/MPRA_paper_58059.pdf|title=Risk-sharing versus risk-transfer in Islamic finance: An evaluation|date=21 August 2014|publisher=The Global University of Islamic Finance (INCEIF) .MPRA Paper No. 58059, (Munich Personal RePEc Archive)|location=Kuala Lumpur|last1=Hasan |first1=Zubair|access-date=23 August 2016}}</ref>|group=Note}} </blockquote>

Some proponents (Nizam Yaquby) believe Islamic banking has more far reaching purposes than conventional banking, and declare that the "guiding principles" for Islamic finance include: "fairness, justice, equality, transparency, and the pursuit of social harmony",<ref name="HIHB2015:532">[[#HIHB2015|Irfan, ''Heaven's Bankers'', 2015]]: p.53</ref> although others describe these virtues as the natural benefits of following Sharia. (Taqi Usmani describes the virtues as guiding principles in one section of his book on Islamic Banking, and benefits in another.)<ref name="IIFTU1998:11,167-8">[[#IIFTU1998|Usmani, ''Introduction to Islamic Finance'', 1998]]: p.11, 167–8</ref>

Nizam Yaquby, for example declares that the "guiding principles" for Islamic finance include: "fairness, justice, equality, transparency, and the pursuit of social harmony".<ref name="HIHB2015:532"/> Some distinguish between Sharia-''compliant'' finance and a more holistic, pure and exacting Sharia-''based'' finance.<ref name="HIHB2015:236">[[#HIHB2015|Irfan, ''Heaven's Bankers'', 2015]]: p.236</ref><ref name="IMSBoSC">{{cite journal|date=13 March 2009|title=Islamic mortgages: Shari'ah-based or Shari'ah-compliant?|url=http://www.islam21c.com/finance/211-islamic-mortgages-shariah-based-or-shariah-compliant/|journal=New Horizon Magazine|access-date=28 October 2015}}</ref><ref name="ali">{{cite web|url=http://irep.iium.edu.my/35516/3/Session_1_-_Dr_Engku_Rabiah.pdf|title=SHARIAH-COMPLIANT TO SHARIAH-BASED FINANCIAL INNOVATION: A QUESTION OF SEMANTICS OR PROGRESSIVE MARKET DIFFERENTIATION|publisher=4th SC-OCIS Roundtable, 9–10 March 2013, Ditchley Park, Oxford, United Kingdom|last1=Ali|first1=Engku Rabiah Adawiah Engku|access-date=28 October 2015}}</ref> "[[Socially responsible investing|Ethical finance]]" has been called necessary, or at least desirable,<ref name="HIHB2015:198">[[#HIHB2015|Irfan, ''Heaven's Bankers'', 2015]]: p.198</ref> for Islamic finance, as has a "[[Hard money (policy)|gold-based currency]]".<ref name="HIHB2015:192">[[#HIHB2015|Irfan, ''Heaven's Bankers'', 2015]]: p.192</ref> Taqi Usmani declares that Islamic banking would mean less lending because it paid no interest on loans. This should not be thought of as presenting a problem for borrowers finding funds, because – according to Usmani – it is in part to discourage excessive finance that Islam forbids interest.<ref name="MTUHJI1999:159">[[#MTUHJI1999|Usmani, ''Historic Judgment on Interest'', 1999]]: para 159</ref> [[Zubair Hasan]] argues that the objectives of Islamic finance as envisaged by its pioneers were "promotion of growth with equity ... the alleviation of poverty ... [and] a long run vision to improve the condition of the Muslim communities across the world."<ref name="Hasan,_Zubair_2010">{{cite book|url=http://mpra.ub.uni-muenchen.de/21224/|title='Islamic finance: What does it change, what it does not? Structure-objective mismatch and its consequences|date=21 February 2010|publisher=International Centre for Education in Islamic Finance (INCEIF)}}</ref>
Some (such as convert Umar Ibrahim Vadillo) believe the Islamic banking movement has so far failed to follow the principles of Sharia law, or at least failed to follow them sufficiently strictly.{{#tag:ref|Convert Umar Ibrahim Vadillo states: "For the last one hundred years the way of the Islamic reformers have led us to Islamic banks, Islamic Insurance, Islamic democracy, Islamic credit cards, Islamic secularism, etc. This path is dead. It has shown its face of hypocrisy and has led the Muslim world to a place of servile docility to the world of capitalism."<ref>{{cite web|last1=Vadillo|first1=Umar Ibrahim |title=Questionnaire for Jurisconsults, subject specialists and general public in connection with re-examination of Riba/Interest based laws by Federal Shariah Court |url=https://umarvadillo.wordpress.com/2013/10/19/answers-to-the-questions-of-the-federal-shariah-court-of-pakistan/|website=Gold Dinar and Muamalat.|date=19 October 2013|access-date=15 November 2016}}</ref>
According to critic Critic Feisal Khan "there have thus been two broad categories of critic of the current version of IBF [Islamic Banking and Finance]: the Islamic Modernist/Minimalist position, and the Islamic ultra Orthodox/Maximalist one. ... The ultra Orthodox [such as the Islamic courts in Pakistan] ... agree with the Modernist/Minimalist criticism that contemporary Islamic banking is indeed nothing but disguised conventional banking but ... agitate for a truly Islamic banking and finance system".{{sfn|Khan|2015|p=114}}|group=Note}}

On the other hand, Usmani preached that an Islamic economy free of the "imbalances" in society – such as concentration of "wealth in the hands of the few", or monopolies which paralyze or hinder market forces – would ''follow'' from obeying "divine injunctions" by banning interest (along with other Islamic efforts).<ref name="IIFTU1998:11">[[#IIFTU1998|Usmani, ''Introduction to Islamic Finance'', 1998]]: p.11</ref> (Later in his book ''Introduction to Islamic Finance'', he argues that Islamic principles should include "the fulfillment of the needs of the society" giving "preference to the products which may help the common people to raise their standard of living", but that few Islamic banks have followed this path.)<ref name="IIFTU1998:167-8">[[#IIFTU1998|Usmani, ''Introduction to Islamic Finance'', 1998]]: p.167-8</ref> Another source ([[Saleh Abdullah Kamel]]),{{#tag:ref|Winner of the 1997 IDB Prize in Islamic Banking|group=Note}} described the changes anticipated for the Muslim community by following Islamic approach to economics, banking, finance, etc., as a "move towards economic development, creation of the value added factor, increased exports, less imports, job creation, rehabilitation of the incapacitated and training of capable elements".<ref name="Kamel_(1998:11ff)">{{cite book|url=http://www.ieaoi.ir/files/site1/pages/ketab/english_book/71.pdf |title=Development of Islamic banking activity: Problems and prospects |publisher=Islamic Research and Training Institute, Islamic development Bank |year=1998 |location=Jeddah |last1=Kamel |first1=Saleh |access-date=22 August 2015}}</ref>

[[File:Sabaibdjib.jpg|thumb|right|A Saba Islamic Bank branch in [[Djibouti (city)|Djibouti City]]]]

===Scriptural basis===

{{further|Riba}}
The [[Sharia]] law that forms the basis of Islamic banking is itself based on the [[Quran]] (revealed to the Islamic prophet [[Muhammad]]) and ''a[[hadith]]'' (the body of reports of the teachings, deeds and sayings of the Islamic prophet [[Muhammad]] that often explain verses in the Quran).<ref>{{Cite web |title=Sales and Trade - Sunnah.com - Sayings and Teachings of Prophet Muhammad (صلى الله عليه و سلم) |url=https://sunnah.com/bukhari/34 |access-date=2023-07-19 |website=sunnah.com}}</ref>
Prohibition of ''[[gharar]]'' is based on ''ahadith'' declaring as forbidden ''gharar'' the sale of things like "the birds in the sky or the fish in the water".<ref name="el-gamal-2001-2">{{cite web |title=An Economic Explication of the Prohibition of Gharar in Classical Islamic Jurisprudence |first=Mahmoud A. |last=El-Gamal |date=2 May 2001 |page=2 |url=http://instituteofhalalinvesting.org/content/el-gamal/gharar.pdf |access-date=4 August 2017 |archive-url=https://web.archive.org/web/20160428043313/http://instituteofhalalinvesting.org/content/el-gamal/gharar.pdf |archive-date=28 April 2016 |url-status=dead}}</ref>{{sfn|Visser|2013|p=53}}{{#tag:ref|Several a[[hadith]], in addition to prohibiting games of chance, prohibit ''bayu al-gharar'' (literally "trading in risk",<ref>{{cite web|url= http://www.muslimummah.org/articles/articles.php?itemno=208&&category=Islamic%20%20Finance |title=Basic Principles of Islamic Finance |website=muslimummah.org|access-date=12 February 2015 |url-status=dead |archive-url= https://web.archive.org/web/20141219130819/http://www.muslimummah.org/articles/articles.php?itemno=208&&category=Islamic%20%20Finance |archive-date=2014-12-19}}</ref>{{better source needed|date=February 2021}} defined as sales in which gharar is the major component).<ref name=el-gamal-2001-3/> Jurists have distinguished between this kind of gharar, and ghasar considered minor (''yasir'') and so permissible (''[[halal]]''),<ref name=el-gamal-2001-3>[http://www.ruf.rice.edu/~elgamal/files/gharar.pdf An Economic Explication of the Prohibition of Gharar in Classical Islamic Jurisprudence] | Mahmoud A. El-Gamal | First version: 2 May 2001</ref> but disagree over what constitutes ''gharar'' that is minor and ''gharar'' that is substantial, (at least according to one source, Abu Umar Faruq Ahmad),<ref name="TaPoMIF-98-9">{{cite book|url=https://books.google.com/books?id=wRlI0nJp5mEC&q=%22Gharar+is+where+the+buyer+does+not+know+what+he+bought%2C+or+the+seller+does+not+know+what+he+sold%22&pg=PA99 |title=Theory and Practice of Modern Islamic Finance: The Case Analysis from Australia|date=2010 |publisher=Universal-Publishers|pages=98–99 |last1=Abu Umar Faruq Ahmad|access-date=17 May 2017|isbn=9781599425177}}</ref> 
have not agreed on an exact definition of the meaning and concept of ''gharar''.<ref name="AL-SUWAILEM">{{cite journal|title=Towards an objective measure of ''gharar'' in exchange |journal=Islamic Economic Studies|volume=7|issue=1, (October 1999); 2, (April 2000)|pages=61–102|last1=Al-Suwailem |first1=Sami |url=http://www.irti.org/English/Research/Documents/IES/119.pdf |access-date=1 August 2016|archive-url=https://web.archive.org/web/20170816233704/http://www.irti.org/English/Research/Documents/IES/119.pdf |archive-date=16 August 2017|url-status=dead}}</ref>|group=Note}} ''[[Maisir]]'' is thought to be banned by verses 2:219, 5:90, and 91 in the Quran.{{sfn|Visser|2013|p=53}}

However, "the Islamic evaluation" of modern banking centers around the definition of interest on loans<ref>{{Cite book|url=https://books.google.com/books?id=OZqJAAAAMAAJ|title=Muslim Economic Thinking: A Survey of Contemporary Literature|last=Siddiqi|first=Muhammad Nejatullah|date=1981|publisher=International Centre for Research in Islamic Economics, King Abdul Aziz University|isbn=9780860370819|pages=29|language=en}}</ref> as ''riba.'' Twelve verses in the Qur'an deal with ''riba'', the word appearing eight times in total, three times in verses {{qref|2|275|pl=y}}, and once in {{qref|2|276|pl=y}}, {{qref|2|278|pl=y}}, {{qref|3|130|pl=y}}, {{qref|4|161|pl=y}} and {{qref|30|39|pl=y}}.<ref name="RBIRPMNS2004:35">Siddiqi, ''Riba, Bank Interest'', 2004: p.35</ref> ''Riba'' is mentioned numerous times in ''a[[hadith]]'', including Muhammad's [[Farewell Sermon]].

A number of orthodox scholars point to Quranic verses (2:275–2:280) as declaring ''riba'' "categorically prohibited" and "unjust" (''zulm''), and defining it to mean any payment "over and above the principal" of a loan.<ref name="RBIRPMNS2004:36">Siddiqi, ''Riba, Bank Interest'', 2004: p.36</ref><ref name="mufti">{{cite web|last1=Seifeddine|title=Surah al-Baqarah, 275–281|url=http://www.muftisays.com/blog/Seifeddine-M/2093_11-10-2011/surah-albaqarah-275281.html|website=muftisays.comm|access-date=14 April 2015|archive-url=https://web.archive.org/web/20150401132438/http://www.muftisays.com/blog/Seifeddine-M/2093_11-10-2011/surah-albaqarah-275281.html|archive-date=1 April 2015|url-status=dead}}</ref> (Although at least one source states "it is commonly argued" that ''riba'' is "defined by hadith".)<ref name="MOFRI6H2009:105">Farooq, ''Riba, Interest and Six Hadiths'', 2009: p.105</ref>

{{Blockquote|text=Those who consume interest will stand ˹on Judgment Day˺ like those driven to madness by Satan’s touch. That is because they say, “Trade is no different than interest.” But Allah has permitted trading and forbidden interest. Whoever refrains—after having received warning from their Lord—may keep their previous gains, and their case is left to Allah. As for those who persist, it is they who will be the residents of the Fire. They will be there forever. <br />Allah has made interest fruitless and charity fruitful. And Allah does not like any ungrateful evildoer. <br />Indeed, those who believe, do good, establish prayer, and pay alms-tax will receive their reward from their Lord, and there will be no fear for them, nor will they grieve. <br />O believers! Fear Allah, and give up outstanding interest if you are ˹true˺ believers. <br />If you do not, then beware of a war with Allah and His Messenger! But if you repent, you may retain your principal—neither inflicting nor suffering harm.<br />If it is difficult for someone to repay a debt, postpone it until a time of ease. And if you waive it as an act of charity, it will be better for you, if only you knew.|author={{qref|2|275–280|c=y}}}}

According to the orthodox, an "increase over the principal sum" in ''loans of cash'' are riba. An increase over the principal sum in ''financing a purchase'' of some product or commodity is another matter. These are ''not'' riba – according to the orthodox interpretation – at least in some circumstances.<ref name="IIBI-murabaha">{{cite web |url=http://www.islamic-banking.com/murabaha_sruling.aspx |title=Q. What is Murabaha? |website=Institute of Islamic Banking and Insurance |access-date=31 August 2016 |archive-url=https://web.archive.org/web/20160831194438/http://www.islamic-banking.com/murabaha_sruling.aspx |archive-date=31 August 2016 |url-status=dead }}</ref> (These are sometimes known as "credit sales".) According to noted Islamic scholar [[Taqi Usmani]], this is because in [[Quran]] aya 2:275 ("they say, 'Trafficking (trade) is like usury,' [but] God has permitted trafficking, and forbidden usury")<ref name="2:275">{{Cite web|url=https://quran.com/al-baqarah/275|title=Surah Al-Baqarah - 275 |publisher=Quran.com}}</ref> "trafficking (trade)" refers to credit sales such as ''[[murabaha]]'', the "forbidden usury" refers to charging extra for late payment ([[late fee]]s), and the "they" refers to non-Muslims who did not understand why if the first was allowed both were not.<ref name="MTUHJI1999:50,51,219">[[#MTUHJI1999|Usmani, ''Historic Judgment on Interest'', 1999]]: paras 50, 51, 219</ref>{{#tag:ref|Monzer Kahf argues that the quranic verse (in 2:275) where non-Muslims complain – "... they say, 'Trade is [just] like interest.' But Allah has permitted trade and has forbidden interest" – refers to credit sales.<ref name=kahf-2007/>|group=Note}} For this reason (according to Usmani) it is ''not'' true that "whenever price is increased taking the time of payment into consideration, the transaction comes within the ambit of interest".<ref name="PCCS"/> Instead of "principal" and "interest rate", the credit taker is paying "cost" and "profit rate".<ref name="IIBI-murabaha"/> (Another difference with conventional finance is that there is no penalty for late payment.){{#tag:ref|Taqi Usmani explains that in such transactions "the whole price ... is against a commodity and not against money" and so "... once the price is fixed, it relates to the commodity, and not to the time". Consequently "the price will remain the same and can never be increased by the seller." If the price had "been against time", (which is forbidden) "it might have been increased, if the seller allows ... more time" for repayment when the bill is past due.<ref name="MTUHJI1999:224">[[#MTUHJI1999|Usmani, ''Historic Judgment on Interest'', 1999]]: para 224</ref>|group=Note}}

===Interest and credit sales===
While Usmani and other Islamic Banking pioneers envisioned credit sales like ''murâbaḥah'' being a limited part of the Islamic Banking industry and subordinate to [[profit and loss sharing]], it has become the "most common" mode of Islamic financing.<ref name="IIBI-murabaha"/><ref name="Irfan-2015-139">{{cite book|last1=Irfan|first1=Harris|title=Heaven's Bankers|date=2015|publisher=Overlook Press|page=139}}</ref><ref name="IFIM">{{cite book|title=Islamic Finance: Instruments and Markets|date=2010|publisher=Bloomsbury Publishing|page=131|url=https://books.google.com/books?id=YxPVBAAAQBAJ&q=Murabahah&pg=PA131|access-date=4 August 2015|isbn=9781849300391}}</ref><ref>{{cite web|url=http://www.mohammedamin.com/Islamic_finance/Simple-introduction-to-Islamic-mortgages.html|title=A Simple Introduction to Islamic Mortgages|date=14 May 2015}}</ref>

The distinction between credit sales and interest has also come under attack from critics such as Khalid Zaheer and Muhammad Akram Khan – criticizing it from opposite points of view. Zaheer considers profit from credit sales to be ''riba'', the same as interest, and notes the lack of enthusiasm of orthodox scholars – such as the [[Council of Islamic Ideology]] – for credit sales-based Islamic Banking, which they (the council) call "no more than a second best solution from the viewpoint of an ideal Islamic system".<ref name="KH-CS">{{cite web|title=Is charging more on credit sales (Murabaha) permissible?|url=http://www.khalidzaheer.com/qa/109|website=Khalid Zaheer|access-date=31 August 2016}}</ref>
Khan calls the distinction "frivolous and laboured", a way of charging interest using another name, necessary because businesses "cannot survive where cash and credit prices are equal".{{sfn|Khan|2013|pp=197. 199}}
Others note that in terms of [[standard accounting practice]] and [[Truth in Lending Act|truth-in-lending regulations]]{{#tag:ref|"Indeed, truth-in-lending regulations in the United States force Islamic and conventional financiers to report the implicit interest rates they charge their customers in such financing arrangements."<ref name=MeGIFLEP2006:52>[[#MeGIFLEP2006|El-Gamal, ''Islamic Finance'', 2006]]: p.52</ref><ref name="El-Gamal-2006-52">{{cite book|last1=El-Gamal|first1=Mahmoud A.|title=Islamic Finance: Law, Economics, and Practice|date=2006|publisher=Cambridge University Press.|page=52|url=https://books.google.com/books?id=2ElRUvoVRxYC&q=Ibn+Rushd+on+riba&pg=PA51|access-date=14 September 2016|isbn=9781139457163}}</ref>|group=Note}} getting 90 days credit on a Rs 10000 product and paying an extra Rs 500, cost very nearly the same and is considered very nearly the same as paying in cash, using a three-month loan at 20% per annum.

Taqi Usmani, however, explains that this is a "misconception". 
Paying more for credit when buying a product ("an exchange of commodities for money")<ref name="IMaBIMiCT-116"/>{{sfn|Khan|2013|p=197}} does not violate Sharia law, but exchange of "one unit of money for another of the same denomination" ("an exchange of money for money")<ref name="IMaBIMiCT-116">{{cite book|last1=Toutounchian|first1=Iraj|title=Islamic money and banking: Integrating money in capital theory.|date=2009|publisher=John Wiley & Sons (Asia) |location=Singapore|page=116}}</ref> and charging for credit ''is'' a violation of Sharia.<ref name="PCCS">{{cite web|last1=Usmani|first1=Muhammad Taqi|title=Pricing for Cash and Credit Sales|url=https://www.islamicbanker.com/education/pricing-cash-and-credit-sales|website=Islamic Banker|access-date=29 August 2016|archive-date=20 November 2016|archive-url=https://web.archive.org/web/20161120011438/https://www.islamicbanker.com/education/pricing-cash-and-credit-sales|url-status=dead}}</ref> The cash loan is different because "money has no intrinsic utility".<ref name="PCCS"/>

Other orthodox supporters (such as Kahf) have defended the Sharia-compliance of the practice saying that among other things, attaching commodities to money in finance prevents money from being used for speculative purposes.<ref name="kahf-2007">{{cite web |last1=Kahf |first1=Monzer |title=Islamic finance: Business as usual |date=c. 2007 |url=http://www.nzibo.com/IB2/Kahf.pdf |access-date=31 August 2016 |archive-date=20 October 2016 |archive-url=https://web.archive.org/web/20161020124626/http://www.nzibo.com/IB2/Kahf.pdf |url-status=dead }}</ref> Critics report widespread abuses of "synthetic" ''murabaha'', which are loans with interest in all but name.<ref name="Vogel and Hayes, pp.8-9">Frank VOGEL and Samuel Hayes, III. Islamic Law and Finance: Religion, Risk and Return [The Hague: Kluwer Law International, 1998], pp.8–9</ref><ref name="MOFRIE-2005:19">[[#HIHB2015|Farooq, ''Riba-Interest Equation and Islam'', 2005]]: p.19</ref>

===Types of Islamic lending===

One of the pioneers of Islamic banking, [[Mohammad Najatuallah Siddiqui]], suggested a two-tier ''mudarabah'' model as the basis of a ''riba''-free banking. The bank would act as the capital partner in ''mudarabah'' accounts with the depositor on one side and the entrepreneur on the other side.<ref name="CMPCM">{{cite web|last1=Curtis|title=Islamic Banking: A Brief Introduction|url=http://omanlawblog.curtis.com/2012/07/islamic-banking-brief-introduction.html|website=Oman Law Blog|publisher=Curtis, Mallet-Prevost, Colt & Mosle LLP|access-date=10 August 2015|date=3 July 2012}}</ref> (Another pioneer Taqi Uthmani called ''mudarabah'' and another profit-sharing form of finance ''musharakah'', the "real and ideal instruments of financing in Shari‘ah".)<ref name=IIFTU1998:12/> This model would be supplemented by a number of fixed-return models—mark-up (''murabaha''), leasing (''ijara''), cash advances for the purchase of agricultural produce (''salam'') and cash advances for the manufacture of assets (''istisna'''), etc. In practice, the fixed-return models, in particular ''[[murabaha]]'' model, became the industry staples, not supplements, as they bear results most similar to the interest-based finance models. Assets managed under these products far exceed those in "[[Profit and loss sharing|profit-loss-sharing]] modes" such as ''mudarabah'' and ''musharakah''.{{sfn|Khan|2013|p=275}}

===Time value of money===
The [[time value of money]]{{sfn|Khan|2013|pp=200-203}} – the idea that there is greater benefit in receiving money now rather than later, so that savers/investors/lenders should be compensated for delayed gratification – has been called one of the "most significant" arguments in favor of charging interest on loans.{{sfn|Khan|2013|p=200}} As such, some Islamic finance supporters have opposed the concept, arguing that some consumption – such as eating – can only be done over time, and discounting for time encourages negative outcomes such as unsustainable production like [[desertification]], since the desertification comes in the discounted future.<ref name="irfan-196">{{cite book |last1=Irfan|first1=Harris|title=Heaven's Bankers: Inside the Hidden World of Islamic Finance|date=2015|publisher=Little, Brown Book Group.|page=196 |url=https://books.google.com/books?id=uJ3ABAAAQBAJ&q=nizam|access-date=28 October 2015|isbn=9781472105066}}</ref> 
However, since Islamic banking also calls for rewarding delayed gratification in the form of "return on investment" on both profit-sharing and credit sales, Islamic scholars and economists have tended to insist that time value of money is a valid concept "provided the rate of discount is the 'rate of return' on capital rather than the rate of interest," a position critics find specious.{{sfn|Khan|2013|p=200}}<ref name="Zarqa-1983">{{cite book |last1=Zarqa |first1=M. Anas |date=1983 |chapter=An Islamic perspective on the Economics of discounting in project evaluation. |title=Fiscal policy and resource allocation in Islam |editor1=Ziauddin Ahmed |editor2=Munawar Iqbal |editor3=M. Fahim Khan |location=Jeddah |publisher=International Centre for Research in Islamic Economics, King Abdulaziz University; and Islamabad: Institute of Policy studies}}</ref><ref name="M.F.Khan-1991">{{cite journal |last1=Khan |first1=Muhammad Fahim |title=The value of money and discounting in the Islamic perspective |journal=Review of Islamic Economics |volume=1 |issue=2 |pages=35–45}}</ref><ref name="TVMCiIF2009">{{cite journal |last1=Ahmad and|first1=Abu Umar Faruq|last2=Hassan|first2=M. Kabir|title=The Time Value of Money Concept in Islamic Finance|date=2009|journal=The American Journal of Islamic Social Sciences |volume=23 |issue=1 |url=http://iefpedia.com/english/wp-content/uploads/2009/11/The-Time-Value-of-Money-Concept-in-Islamic-Finance.pdf|access-date=31 August 2016}}</ref>

===Early payment of debt===
The opposite of credit sales (i.e. the opposite of charging more in exchange for giving the buyer time to pay) is reduced charges for early payment. This is considered ''[[haram]]'' by the four Sunni schools of jurisprudence (''[[Hanafi]]'', ''[[Maliki]]'', ''[[Shafi'i]]'', ''[[Hanbali]]''), but not by all jurists according to Ridha Saadullah. He notes that such reductions have been permitted by some companions of [[Muhammad|the Prophet]] and some of their followers. This position has been advanced by [[Ibn Taymiyya]] and [[Ibn al-Qayyim]], and it has, more recently, been adopted by the Islamic ''[[Fiqh]]'' Academy of the [[Organisation of Islamic Cooperation|OIC]]. The Academy decided that "reduction of a deferred debt in order to accelerate its repayment, whether at the request of the debtor or the creditor is permissible under ''Shariah''. It does not constitute forbidden ''riba'' if it is not agreed upon in advance and as long as the creditor-debtor relationship remains bilateral. ..."<ref>(Islamic Fiqh Academy, 7th session, 1992, Resolution 66/2/77)</ref><ref name="Saadullah-1994:7">{{cite journal |last=Saadullah |first=Ridha |date=1994 |title=Concept of time in Islamic economics |journal=Islamic Economic Studies |volume=2 |issue=1 |pages=1–15}}</ref>

=== Islamic laws on trading ===
[[File:IDB Dhaka.jpg|thumb|right|An Islamic Development Bank branch in [[Dhaka]]]]
{{main|Sharia and securities trading}}
As noted above, the primary focus of Islamic banking is on financing without interest to avoid ''riba'',<ref name=MNSMET1981/> while trade is not an issue (per the [[Quran]]ic statement that ''"God has permitted trade and forbidden riba [usury]"''.<ref name=2:275/> However trade transactions that involve [[gambling]] (''[[maisir]]''), or excessive risk (''bayu al-[[gharar]]'') are ''not'' permitted. Among the financial instruments and activities common in conventional finance that are considered forbidden (or at least Islamically problematic) by many Islamic scholars and Muslims are: 
*[[Margin (finance)|margin trading]]: This uses borrowed money to buy shares of stock or other financial instruments. It both involves forbidden interest on the borrowed money,<ref name=dummies-FMTaIF/> and much greater risk than non-margin investing because losses can be greater than the amount borrowed;<ref name="MG-2005">{{cite web|title=Investing in stock market: the Shariah way|url=http://www.milligazette.com/Archives/2005/01-15July05-Print-Edition/011507200530b.htm|website=Milli Gazette|access-date=21 October 2017|date=1–15 July 2005}}</ref>
*[[Short (finance)|short selling]]: borrowing/renting shares of stock or some other instruments and selling it, sometimes without possessing it, on the hope that it can be later repurchased at a lower price for a profit. It is traditionally thought to violate the hadith stating "Do not sell which you do not possess," and has been declared impermissible by numerous sources (Raj Bhala,<ref name="Bhala-26.05">{{cite book|last1=Bhala|first1=Raj|title=Understanding Islamic Law |date=2011|publisher=LexisNexis |chapter-url=https://books.google.com/books?id=P8MuP_POzh0C&q=example+of+trading+forbidden+as+gharar&pg=PT552 |access-date=18 May 2017|chapter=26.05|isbn=9781579110420}}</ref> Taqi Usmani,<ref name="IIFTU1998:11"/> Humayon Dar.<ref name="Dar-2012">{{cite web|last1=Dar|first1=Humayon|title=Short-Selling in Islamic Finance|url=https://www.youtube.com/watch?v=XbG0kAWjz-0  |archive-url=https://ghostarchive.org/varchive/youtube/20211211/XbG0kAWjz-0| archive-date=2021-12-11 |url-status=live|website=youtube |access-date=16 October 2017 |publisher=Islamic Institute of Banking and Insurance |date=16 February 2012}}{{cbignore}}</ref>
*[[day trading]]: very short term buying and selling of financial instruments) has been called un-Islamic because the short period of "ownership" means day traders do not truly own what they trade, and furthermore pay interest.<ref name="fsb">{{cite web|title=UAE System, Laws and Regulations for Foreign Investors, Permitted Activities|url=http://www.fbsemirates.com/uae-system-laws-and-regulations-for-foreign-investors-permitted-activities/|website=Focus Business Services|date=9 December 2013 |access-date=18 May 2017}}</ref> Among the sources calling it un-Islamic include Yusuf Talal DeLorenzo,<ref name="DeLorenzo-day">{{cite web|last1=DeLorenzo |first1=Yusuf Talal |title=Day Trading in Stocks vs. Investment|url=https://muslim-investor.com/answers/day-trading-vs-investment.html |website=muslim-inestor.com |access-date=18 May 2017}}</ref> and Focus Business Services of the UAE.<ref name="fsb"/>
*[[Derivative (finance)|derivatives]]: contracts that derive their value from the performance of an underlying asset; (The "notional value" of the world's over-the-counter derivatives at the end of 2007 was $596 trillion and the gross market value of all outstanding derivatives was $14.5 trillion.)<ref>{{cite news |url=http://www.slate.com/articles/news_and_politics/explainer/2008/10/596_trillion.html |work=slate.com |last1=Leibenluft |first1=Jacob |date=15 October 2008 |title=$596 Trillion! |access-date=8 August 2017}}</ref> Options, futures and "other derivatives" are "generally" not used in Islamic finance "because of the prohibition against maisir",<ref name="TRPL">{{cite web|title=Maisir|publisher=Thomson Reuters|url=https://uk.practicallaw.thomsonreuters.com/9-500-7087?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1|website=uk.practicallaw.thomsonreuters.com|access-date=19 October 2017}}</ref> Sources stating that most derivative or some kinds of derivative are banned by Islamic scholars include Juan Sole and Andreas Jobst,<ref name="Sole-2012-4">Solé, Juan A. and Jobst, Andreas (Andy), Operative Principles of Islamic Derivatives – Towards a Coherent Theory (March 2012). IMF Working Paper No. NO.12/63. Available at SSRN: https://ssrn.com/abstract=2028239</ref> P. S. Mills and J. R. Presley,<ref name="Mills and Presley 1999">{{cite book|title=Islamic Finance: Theory and Practices|last2=Presley |first2=J.R.|date=1999|publisher=St. Martins Press|location=New York|last1=Mills|first1=P.S.}}</ref>{{sfn|Khan|2015|p=111}} Taqi Usmani,<ref name="INCEIF">{{cite web |last1=bin Kamaruzdin |first1=Thaqif |title=Derivatives and Islamic Finance |url=http://www.inceif.org/research-bulletin/derivatives-islamic-finance/ |website=INCEIF |access-date=16 June 2017 |date=15 October 2014 |archive-url=https://web.archive.org/web/20170816233744/http://www.inceif.org/research-bulletin/derivatives-islamic-finance/ |archive-date=16 August 2017 |url-status=dead }}</ref> and [[Investopedia]].<ref name="investo-terms">{{cite web |title=Gharar |url=http://www.investopedia.com/terms/g/gharar.asp |website=Investopedia|access-date=18 May 2017}}</ref> The most commonly used<ref name="FJIFD2012:183"/> derivative are: 
**[[Forward contract|forwards]]: customized contracts to buy or sell an asset at a specified price on a future date. unlike futures contracts forward contracts are not traded on any exchanges; 
**[[Futures contract|futures]]: a legal agreement to buy or sell a particular commodity or financial instrument at a predetermined price at a specified time in the future; 
**[[Option (finance)|options]]: contracts offering the buyer the right, but not the obligation, to buy (call) or sell (put) a security or other financial asset at an agreed-upon price (the strike price) during a certain period of time or on a specific date (exercise date); 
**[[Swap (finance)|swaps]]: contracts through which two parties exchange financial instruments to transfer risk.

On the other hand, at least one Islamic scholar (Mohammed Hashim Kamali) finds "nothing inherently objectionable" in selling and using options, which like other kinds of trade is ''[[mubah]]'' (permissible) in [[fiqh]], and "simply an extension of the basic liberty that the Quran has granted".<ref>Kamali, M.H. (1997) "Islamic commercial law: an analysis of options", ''The American Journal of Islamic Social Sciences'', v.14 n.3, pp. 17–18</ref> And both Islamic finance practitioners and critics find benefit in at least some uses of derivatives and short selling – managing risk in times of financial trouble,<ref name="Y-Sing">{{cite news|last1=Y-Sing|first1=Liau|title=ANALYSIS – Derivatives dispute divides Islamic finance market|url=http://in.reuters.com/article/idINIndia-37874420090206|archive-url=https://web.archive.org/web/20090220220220/http://in.reuters.com/article/idINIndia-37874420090206|url-status=dead|archive-date=20 February 2009|access-date=19 May 2017|work=Reuters|date=6 February 2009}}</ref> improving market efficiency and employee productivity.<ref name="Jobst-5-2008">{{cite journal|title=Derivatives in Islamic Finance|url=http://www.eurekahedge.com/NewsAndEvents/News/728/Derivatives_in_Islamic_Finance|journal=Islamic Finance News|volume=4|issue=50|last1=Jobst|first1=Andreas A|access-date=19 May 2017}}</ref>

At least some in the Islamic finance industry use derivatives and make short sales, and permissibility of this is a subject of "heated debate".<ref name="Kettell-2010">{{cite book|last1=Kettell|first1=Brian|title=Frequently Asked Questions in Islamic Finance|date=2010|publisher=John Wiley & Sons.|chapter-url=https://books.google.com/books?id=QKgF8TPpr9AC&q=maisir+Derivatives&pg=PT105|access-date=19 October 2017|chapter=4. Derivatives and Islamic Finance|isbn=9780470711897}}</ref>
Global standards for trading Islamic profit-rate and [[currency swap]] [[derivative (finance)|derivatives]] were set in 2010 with the "Hedging Master Agreement"<ref name="hma">{{Cite web |title=Hedging Master Agreement |url=http://www.isda.org/media/press/2010/press030110.html |access-date=12 October 2017 |archive-url=https://web.archive.org/web/20171014083539/http://www.isda.org/media/press/2010/press030110.html |archive-date=14 October 2017 |url-status=dead }}</ref><ref name="GIF-2010">{{cite news|title=ISDA, IIFM Set Global Islamic Derivatives Standards|url=http://www.global-islamic-finance.com/2010/03/isda-iifm-set-global-islamic.html|access-date=21 July 2016|agency=Bloomberg|publisher=Global Islamic Finance|date=3 March 2010}}</ref><ref name="iran-daily.com">[http://www.iran-daily.com/1388/12/11/MainPaper/3630/Page/5/Index.htm iran-daily.com]| (click on "Islamic Derivatives Standards Set")| 2 March 2010</ref> (see below).
A "Shariah-certified" short-sale had been created by some Shariah-compliant hedge funds.{{sfn|Khan|2015|p=111}}<ref name="Morais 2007:132">{{cite journal |last1=Morais |first1=R.C. |date=23 July 2007 |journal=Forbes |title=Don't call it interest |url=https://www.forbes.com/forbes/2007/0723/122.html |page=132 |access-date=11 June 2017}}</ref> However both have been criticized as un-Islamic.{{sfn|Khan|2015|p=111}}<ref name="Morais 2007:132"/>

===Justification for Islamic banking ===
It has been praised – or at least described positively – for 
*turning a "theory" into a trillion dollar<ref name="FosterMM2010">{{cite news |url=http://news.bbc.co.uk/2/hi/business/8401421.stm |last1=Foster |first1=John |title=How Sharia-compliant is Islamic banking? |agency=BBC News |date=11 December 2009 |access-date=24 November 2017}}</ref><ref name="farooq-130">{{cite journal|date=2009|title=Riba, Interest and Six Hadiths: Do We Have a Definition or a Conundrum?|url=https://poseidon01.ssrn.com/delivery.php?ID=671000027113006031019116002071081094024007017009023053125009096106110102119120111014052048008024051061012103123122078098003074038038069086032099087082119087064099127070037020097126070090119069122002004004001099096113126066096123092123106006067123110024&EXT=pdf|journal=Review of Islamic Economics|volume=13|issue=1|page=130|last1=Farooq|first1=M.O.|access-date=15 December 2016}}{{Dead link|date=September 2023 |bot=InternetArchiveBot |fix-attempted=yes }}</ref><ref name="IIFTU1998:162-3">[[#IIFTU1998|Usmani, ''Introduction to Islamic Finance'', 1998]]: p.162-3</ref> "reality", asserted Islam into international financial markets (according to Taqi Usmani);<ref name="IIFTU1998:162-3"/>
*enriched the Islamic legal system by providing it with real world business questions to find shariah-compliant solutions for (Usmani);<ref name="IIFTU1998:162-3"/> 
*creating an "ethical, sustainable, environmentally- and socially-responsible" system (according to Abayomi A. Alawode);<ref name="Alawode-WB-2015">{{cite web|last1=Alawode|first1=Abayomi A.|title=Islamic Finance|url=http://www.worldbank.org/en/topic/financialsector/brief/islamic-finance|website=World Bank|access-date=9 November 2017|date=31 March 2015}}</ref>
*drawing conventional banks into the industry in search of Muslim customers (Munawar Iqbal and Philip Molyneux);{{#tag:ref|"Another achievement of Islamic banking may be gauged from the fact that many conventional banks have also started using Islamic banking techniques in the conduct of their business, particularly in dealing either with Muslim clients or in dominantly Muslim regions."<ref name="[Iqbal and Molyneux, p. 58]">Munawar IQBAL and Philip Molyneux. Thirty Years of Islamic Banking: History, Performance and Prospects [Palgrave, 2005], p.58</ref>{{sfn|Farooq|2005|pp=12-13}}|group=Note}}
*drawing new customers and money into banking, rather than taking existing customers and their money away from conventional banking, (Laurent Gheeraert).<ref name="Gheeraert-2014">{{cite journal|last1=Gheeraert|first1=Laurent |title=Does Islamic finance spur banking sector development? |journal=Journal of Economic Behavior & Organization|date=July 2014 |volume=103|issue=Supplement|pages=S4–S20 |doi=10.1016/j.jebo.2014.02.013 }}</ref>
*Creating a less risky form of finance (according to Zeti Akhtar Aziz and others), 
**by forbidding speculation,<ref name="Bahru-5-5-15">{{cite news|date=5 January 2013|title=Banking on the ummah|url=https://www.economist.com/news/finance-and-economics/21569050-malaysia-leads-charge-islamic-finance-banking-ummah|newspaper=The Economist|volume=406|issue=8817|page=60|last1=Bahru|first1=Johor|access-date=5 May 2015}}</ref> so that, for example, the excesses that led to the [[2008 financial crisis]] are avoided (according to Ibrahim Warde);<ref name="Sergie-cfr-2014">{{cite journal|last1=Sergie|first1=Mohammed Aly|title=The Rise of Islamic Finance|journal=Council on Foreign Relations|date=30 January 2014|url=https://www.cfr.org/backgrounder/rise-islamic-finance|access-date=9 November 2017}}</ref>
**and by use of two kinds of accounts:{{sfn|Khan|2013|pp=329-330}}
***"current accounts" – where funds earn no return and (in theory) are held, not invested by the bank, so not subject to risk;{{sfn|Khan|2013|pp=329-330}}
***and ''mudarabah'' accounts – where the depositors share in any losses with the bank, so diminishing the bank's risk.{{sfn|Khan|2013|p=330}}
*While the industry has problems and challenges, these can be explained by
**its relative youth and low position on the "[[learning curve]]" that will solved these difficulties over time;<ref name="IIFTU1998:xviii">[[#IIFTU1998|Usmani, ''Introduction to Islamic Finance'', 1998]]: p.xviii</ref><ref name="auto">{{cite book |last=Ahmad |first=A. |year=1993 |title=Contemporary Practices of Islamic Financing Techniques |series=Research Paper #20 |location=Jedddah |publisher=Islamic Research and Training Institute, Islamic Development Bank |url=http://www.irti.org/English/Research/Documents/IES/154.pdf |access-date=6 June 2017 |archive-date=17 May 2017 |archive-url=https://web.archive.org/web/20170517134948/http://www.irti.org/English/Research/Documents/IES/154.pdf |url-status=dead }}</ref> and by
**non-Islamic influences which can only be eliminated when the industry operates in a truly Islamic society and environment.{{sfn|Farooq|2005|p=36}}