Islamic Banking System in the Light of Sharia and the Contemporary Fatwa

Abstract

Banking, undeniably, is a landmark feature of modernization which casts its impact all across the globe. The conventional banking is interest-based (Riba oriented); whereas, interest (Riba) is strictly prohibited in Islam. A majority of the Muslims feels restricted because of their sensitivity towards interest. Quite a number of Islamic scholars and intellectuals have tried to augment a transformation of the conventional banking into an interest free banking system which is known as Islamic Banking. However, many Islamic scholars do not agree with it and oppose it. It develops a situation of ambiguity and ambivalence about Islamic Banking for the Muslims. This paper explores the religious and rational issues related to the evolution of Islamic Banking. This research concludes that the existing Islamic Banking is not an entirely Islamic system but it is a great step towards introducing interest free banking based on Islamic principles. This analysis has been made through the jurisprudential evaluation of the Islamic principles of trade and economy, permanent Islamic laws, and moral Islamic laws regarding the financial matters. The research highlights the significance of Islamic Banking for synchronizing the Islamic religious and financial theory and practice. This is a qualitative study based on the teachings of the Holy Quran and Sunnah.