Islamic bank philosophy in the ever developing financial sector
UAE Islamic Bank can be defined as a banking practice that comes in accordance with the values of Islam as being governed by the Shariah complaint laws. Islamic banking is an interest-free banking structure that involves a wide range of services and products with no interest involved. However, this particular system is not only about avoiding interest. Islamic banking is also about avoiding unethical practices and taking part in activities that would promote activities that are harmful for the society.
The philosophy of Islamic banks lies in the banned interest, even if it is not against all profits on capital. What it prohibits is the predefined ratio and increase of fund percentage as part of a loan or debt procedure. Islamic principles require that the performance of capital should be taken into account too.
The form of business that is allowed by Islamic bank regularities is based on risk and profit sharing where the profit is viewed as a reward for the use of capital. The parties are also taking the risk for losses and it is managed as a part of the capital. The Islamic bank system being based on sharing of the risk and profit, it as well enables the handling of the physical goods and the involvement in the trading or leasing process by means of various Islamic financial instruments.
Islamic banks deal with the asset management matters to be able to generate income. Dubai Islamic bank need to be very careful on managing the only risk that is involved in the asset management procedure due to corporate governance.
Financial transactions are allowed for goods and services that are beneficial for the society. This Islamic bank mechanism can serve as a good example of a successful banking discipline and financial conduct. As such financial institutions work under the Shariah compliant principles, Islamic bank is presented as a convenient model for saving recourses that can greatly contribute to the economic development and growth.
Modern technologies have prompted Islamic banks to start using services that are directly connected to the Internet. Thus, internet banking and mobile banking were approved. Internet Banking came as a favorable solution for customers that have no time to go to the bank for simple banking transactions. Customers can easily use internet banking by means of a computer anytime and anywhere. Mobile Banking, instead, is using mobile devices to get access to bank accounts or make usual transactions. Sometimes mobile banking applications can be used for this purpose.
Islamic banks are able to not only survive without interest but can be helpful in achieving the main goal of development that refers to financial justice which is possible by means of supplying risk capital to the economy, as well as facilitating the formation of capital and the growth of fixed assets and business activities.
Islamic bank strategies are good for financing of short- or long-term projects, import financing, as well as financing of single transactions. Islamic bank plays an important role in the development of the economy that can bring more customers in the sector. Its services offer flexible conditions and features to meet the needs of different economic areas and business purposes. Even if bank techniques may not reduce income inequalities or generate capital goods, Islamic banks will continue to supply the demand in an environment free of interest with its additional benefits in the matter of more efficient allocation of recourses and its active role in promoting the Islamic finances regulations.