Conceptualising Islamic Law on Banking

The chapter focuses on the foundational principles of Islamic law as applied to banking. It explores the Islamic understanding of economics and commercial law, emphasising their role in shaping the fundamental principles on which the present Islamic banking operates. The chapter examines how Islamic values and ethics influence commercial and contractual practices, crucial for Islamic finance. Central to Islamic law on banking are principles like the prohibition of riba (interest), encouraging risk-sharing in profit–loss agreements, and avoiding transactions with gharar (excessive uncertainty), or those involving prohibited goods ( haram ). Islamic banking also underlines social responsibility through practices like qard-al-hassan (interest-free loans) and zakat (obligatory alms). This holistic approach integrates economic activities with Islamic ethical considerations, contrasting with the conventional banking model.