International Banking Essay Example | Topics and Well Written Essays - 2000 words - 2

International Banking - Essay ExampleStudying the prospects and challenges for Moslem banking could reveal useful lessons for a reorientation of Western conventional banking.A key feature of the conventional banking brass as well(p) today is that it is based on interest. This is an amount of money that is paid on deposits at banks and levied on the loans they provide. This system is designed to benefit money lenders whereas borrowers are made to bear the risks entirely. Consequently, this system facilitates exploitation and many borrowers experience burdened by rising values of their debts. Occasionally the problems become so extensive that financial crises occur.The Islamic financial system is characterized by the strict restraint of riba, which is the charging, paying and receiving of interest on money loaned. The Quranic order is in chapter 2, verse 275, which states, Allah has allowed the sale and has prohibited interest. The prohibition extends to both the lending and tak ing of money involving interest or partaking in any other way in an interest based transaction. The acknowledgment is that the charging of interest results in an imbalance and it therefore promotes exploitation whereas the Islamic system is designed to ensure balance, loveliness and justice (adl) in all financial dealings. Actually, Islamic finance is not unique in its prohibition of interest but it has perhaps developed the most sophisticated system to help implement interest-free banking. As Lewis (2007) noted, usury was prohibited in all the major religions but people then made it acceptable. For example, it is to a fault prohibited in Exodus (2225). In addition, the shariah (Islamic law) advises to avoid gharar (uncertainty), qimar (speculation) and greed. In short, shariah compliant financial products and services do not involve any interest and speculation and uncertainty is minimised as farther as possible.Instead, the Islamic system of finance is based on the principle of shirakah, which