Islamic Commercial Matters FAQ #

Islamic banks are, in essence, businesses that require profit to continue their operations.

The difference between Islamic and conventional banks is that the profit is made through permissible means, and it does not engage in Ribawi (interest-based) practices.

To ensure the sustainability of its operations according to the shariah permissible means, business practices like Murabahah (buy then sell at a markup price), Bai’ Bithaman ‘Ajil(Selling at a deferred price), Ijarah al-Muntahiyah Bittamlik (Rent that leads to ownership) and so on.

The absence of ribawi practices does not translate to cheaper products and services.

Islamic banks still have to account for the standard conventional banks operating expenses on top of the cost for shariah auditors and shariah advisors.