The main idea behind Islamic banking in UAE is sharia complaint law and system which is completely interest-free. The principles of Islamic Banking are based on the balance sharing between lender and borrower on an equal basis and for the well-being and prosperity of customers. This is a two-way process in which both parties shared the same values. It means not only a company or a lending bank has to flourish, but the person who has invested in some sort of services should be entertained. Both parties share the profit and loss on an equal basis so that to save each other from a big loss.
This Islamic banking system in the light of sharia complaint laws is therefore considered as a tailor-made for every step and try to focus on quality and quantity at the same time. You need to understand the difference so that to get an idea about the contribution of the Islamic banking system in the UAE. Like all other private as well as public sector banks, this system provides all kinds of similar services including priority banking. As most of the people in the UAE are expatriates and they are very much interested in this system due to its interest-free technique.
This is a system of banking that is in accordance with the value system of Islam and is guided by Sharia’s principles so that people can get some benefits. The central idea of this system is that money itself has no intrinsic value and cannot increase on its own. For example, if someone borrowed an amount like sharia funds from a bank or any other financial institution, he/she must be focused on the terms and conditions which are for sure different from the conventional banking system.
Investment through Islamic banking:
For saving and making investments in different areas in UAE, most of the rules applied including that bank will work with the capital and invests in various appropriate sectors / projects. At the end of the scheme, the sharing of profits or loss generated from the investments are divided between customer and bank on an equal basis as per agreement. While on the other hand if we have a look at conventional or traditional banking, the saver or investor receives the profit only according to the ratio on their savings balances or investments. There is no concept of loss and account holders would always be at a safe end.
Like all other investments in different sectors, an Islamic bank works in the same way. Best investment funds can be generated through diverse areas like:
- Investment in the education sector
- Investment in infrastructure
- Investment in the food business
There are many other areas like stock exchange and forex trading. But keep one thing in your mind that an Islamic bank, therefore, does not work on the basis of interest to generate income. This system is totally different and works on the basis of profit/loss margin according to permitted trade agreements. This profit can be articulated in percentages or earnings, but it is not interesting like in the conventional syste
Mashreq Capital UAE 