The Rightful Way of Banking

Shahid M. K. Ghauri · Omar Masood

Feb 2015 · Cambridge Scholars Publishing

About this ebook

It has taken over five centuries for banking to evolve to its present state, and the concept of “interest” is undoubtedly the life-blood of the whole financial system. Interest was religiously prohibitive for centuries in several faiths, such as Buddhism and Hinduism, Judaism, Christianity and, Islam, and was also strongly opposed by neo-classical economists in the 1930s. Interest (riba) is still outlawed in Islam, with the term “riba-eater” being one of the cruellest insults. Islamic scholars have explained that the current practice of contracts without interest is a result of following the jurisprudence laid in the Quran and Sunnah of Prophet Mohammad (sallallahu alayhi wa sallam). As such, this mode of banking and finance without riba is recognised as “Islamic banking”. This name has often been criticised by scholars as there is no philosophy of banking in Islamic teachings. Consequently, some of the banks that follow these regulations have adopted other names, such as savings banks and finance houses.

This book explains the philosophies behind the current trend in riba-free banking which is implemented as Islamic banking around the world. The book is divided into five sections, the first of which is related to the introduction of riba-free banking. The second is related to the fundamentals, concepts and beliefs of riba-free banking organisations, while the third differentiates between two streams of financial models. The fourth section explains risk management in riba-free banking, while the final section discusses international institutions related to the riba-free financial system. The book also contains a glossary of terms related to riba-free banking, and a terms index for reader’s ease in academic study.

About the author

Professor Omar Masood is the former Director of the Centre of Islamic Banking and Finance at Royal Docks Business School at the University of East London, and the Leader of the Centre of Islamic Banking in Malaysia. He has served as a leading authority and advisor in the area of Islamic banking and finance to both financial institutions and academic institutions worldwide. He holds Visiting Professorships at leading universities around the world, and serves as an advisor to a number of governments, including Turkey, Malaysia and Saudi Arabia. Professor Masood has authored over a hundred peer-reviewed research papers, which have been published in international journals, and has also authored a number of best-selling books printed by leading publishers.

Shahid M. K. Ghauri holds over 13 years of banking experience and has worked with renowned institutions like Habib Bank AG Zurich, ABN AMRO Bank and the Royal Bank of Scotland. He currently holds the position of regional manager at a bank, and is a PhD candidate and Research Associate on Islamic Finance. He has authored number of books and research papers on Islamic finance in various peer-reviewed journals.