Definition of Islamic Banking

Definition of Islamic Banking I; Islāmic banking is a banking system that was developed based on the sharia (law) of Islam. Establishment of business system is based on the Prohibition in the Islamic religion to collect and borrow with interest or so-called "usury" as well as investment restrictions for businesses, categorized illegitimate in Islamic law (such as businesses associated with food production / "drink unclean", the business un-Islamic media, etc.), where this can not be guaranteed by the conventional banking system.

Definition of Islamic Banking II, Muhammad, in his book financial institutions of contemporary people (2000: 62, 63) defines that Islamic Banking is: "Financial institutions are businesses primarily providing financing and other services, the traffic and circulation of cash payments adjusted with the implementation of Islamic law".

Definition of Islamic Banking III, according to the Encyclopedia of Islam, Islamic Banking is: "Financial institutions that give credit and basic business services in the traffic of payment, as well as the circulation of money that its implementation is adjusted with the Principles of Islamic legal principles"

Definition Islamic Banking IV, according to Antonio perwataatmadja and Muhammad Shafi, the Islamic Bank is a bank whose implementation by the principles of Islamic law, especially on ways for doing business in Islam. One element that should be shunned in the "business of Islam" is a practice which has elements of "" usury "." Also explained that Islamic Banking is the bank that the ways implementing the provisions referring to the Koran and Hadith, by the recommendation and the ban, which shunned the practice is that it has elements of usury, while those followed by the implementation of business conducted at the time of the Prophet or form of business that has been there before, but not forbidden by the Prophet.

From the explanation about Definition of Islamic Banking, Islamic Banking has the following characteristics:
  • In Islamic banking, bank relationships with customers is a contractual relationship (contract) between the investor fund owner (Shohibul maal) with a investors fund manager (mudharib) that work together to be productive and the profits divided equally (Investment mutual relationship). Thus, it can avoid the exploitative relationship between the bank and the client or vice versa between customers and banks.
  • The existence of prohibitions of certain activities by the Islamic Banking business which aims to create productive economic activities (the prohibition to accumulate wealth (natural resources) are controlled by a small community and non-productive, creating a fair economy (business concept for yield and for risk) as well as preserving the environment and uphold the moral (prohibition for projects that damage the environment and not in accordance with moral values, such as liquor, gambling facilities and others.
  • The operations of Islamic banking is more varied than conventional banks, namely for the profit-sharing from the sale and buy system, leasing system and give other services, and it does not violate the values ​​and principles of Islamic law.

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    1. The Islamic banking has its two primer principles, one is Islamic banking is the sharing of profit and loss and the embargo of the collection and payment of interest.
      Shariah Advisory

    2. Islamic banking will be of more volume than conventional banking in next ten years. Opening an Islamic Account is the first step to get benefits of Islamic banking.