Essay --

Another major principle of Islamic is fairness. In Islamic banking, fairness is highlighted through its operations which the dubious terms and condition transactions are not engaged with Islamic banks. Terms and conditions needed in a transaction are disclosed in the agreement. In addition, everyone in the transaction can make informed decision which are not misled or cheated. Besides, according to article for WIBC on Islamic Banking and Finance, there is a clear division between the allowed and forbidden of the activities. For example, transactions involving alcohol, gambling, armaments, pork related products, and other socially detrimental activities should be avoided in Islamic Finance. In Islamic banking, there are still five main concepts which are profit and sharing, Wadiah, Musharakah, Murabaha and Ijarah. Profit and loss principle is actually based on mudarabah principle. Under this principle, profits will be shared between owner of capital (financier) and the entrepreneur on the basis of contractual agreement. However, financier will lost it money invest if the business fail. This means that, income from the money invest by financier is not guarantee. For wadiah, refund of the principal is guarantee by the bank. Depositor under this principle might receive a share on profit of the bank’s business. Wadiah is safekeeping as their principal is guarantee in full of demand although the profit of investment by bank is not guarantee. Musharakah is a joint enterprise or partnership business which both parties will manage the business together. Under this principle, ratio of profit or loss pre-determined basic. After a certain periods, a party can terminate the joint venture gradually. Murabaha is another principle of Islamic ban... ...e in financial resources. The principle of Islamic is Syariah, it is developed through four main Islamic juristic schools which is Hanafi, Maliki, Shafi and Hanbali. However, Quran and Sunna is the two main sources which the Shariah derived from. In Islamic finance, there are three major principles. Firstly, the prohibition of usury or interest (riba). In the words of Maulana Maudoodi, page 139, Riba can be defined as the stationary increase on the capital which collected against a fixed period. This means that interest is consider as riba if the amount loaned is going doubled and re-doubled and it is given as consumption needs instead of productive needs. One of the examples of riba is rental income. According to Chapter 2, Verse 275 of the Qu’ran, involve in trade activities although is sound like soft of riba but actually is encouraged by Islam but not for riba.