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    Shari'ah Frequently Asked Questions

    Islamic Banking is a system of banking that is in accordance with the spirit and value of Shari’ah
    A set of norms, values and laws that govern the Islamic way of life. It therefore embodies all aspects of Islam including beliefs and practices. It is derived from The Holy Qur’an, Sunnah(saying and actions of the prophet Muhammad P.B.U.H), Ijmaa (consensus of Shari’ah scholars) and Qiyas (Analogy)
    Islamic banking is based on principles of Shari’ah, unlike non – Islamic banking, all aspects of Islamic banking including transactions, products, business approach and investments are in compliance with Shari’ah.
    The principles include among others, mutual risk and profit sharing, prohibition of riba (Interest or usury), prohibition of speculative behavior and prohibition of unlawful activities.
    In Islam, the validity of a transaction does not depend on the result but rather on the process of achieving the result. Therefore, the underlying transaction through contracts' and products' structure makes the process used in Islamic banking different from non- Islamic banking.
    Interest (riba) is prohibited in Islam. Islamic banks earn profit through Shari'ah compliant related trade, investment and banking services.
    There are various reasons as to why interest (riba) is prohibited in Shari'ah. One of the primary reasons is that its existence in an economy is a form of economic and social exploitation. This is so when the lender is guaranteed a positive return without assuming a share of risk with the borrower, whereas the borrower takes all sorts of risk in addition to his skill and labor.
    Shari'ah recognizes time value of money hence acknowledge its compensation in sales contracts and not in lending. Time, by itself does not give yield but only contribute to the creation of value when an economic activity is undertaken.
    No, other faiths such as Christianity, Hinduism and Judaism prohibit charging of interest. For instance, this is evident in the Bible in the books of Exodus 22:25, Leviticus 25:36, Proverbs 28:8 and Ezekiel 18:8.
    In principle, it is not allowed for Islamic banks to charge penalty fee. However, Shari'ah Scholars have allowed it on the delinquent. In such a case, the proceeds of penalty are channeled to charity. The bank’s Shari’ah Supervisory Board ensures that the bank does not directly or otherwise benefit from the charity funds.
    Islamic banks like any other banks are subjected to the rules and regulation of the Central Bank. The regulator has allowed Islamic banks to operate in the country within the legal and Shari’ah frameworks
    Islamic banks have both a Shari'ah Department and an independent Shari'ah Supervisory Board that ensures Shari'ah concepts and standards are applied in all banking activities . Therefore, before offering any products or services to the public, the bank must get Shari'ah Board’s approval.
    The Board plays an important role in ensuring that all banking activities are in accordance with Shari’ah. Therefore, the board review, approve, supervise and audit the bank’s transactions, contracts and product structure.
    The members of Shari’ah Supervisory Board are neither employees nor have executive roles in the bank. They are independent, qualified Shari'ah experts appointed by the bank’s stakeholders at the Annual General Meeting.
    No, Islamic teachings are universal in nature. Thus, values such as free consent, ethics, social responsibility, justice and honesty among others form the principles of Islamic banking.

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