Islamic banking

8-4-2002 | IslamWeb

Question:

My question is regarding the Islamic bank. How do the employees in an Islamic bank get their monthly salary and from where? How does an Islamic bank function? If you have some book or site regarding this information in detail, please forward it to me.

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Answer:

Praise be to Allah, the Lord of the World; and may His blessings and peace be upon our Prophet Muhammad and upon all his Family and Companions.

Basically an Islamic bank avoids dealing with usury or interest-based transactions, unlike the commercial banks. An Islamic bank tries to conduct Halal transactions instead of Haram transactions performed by other banks. An Islamic bank consists of three main sectors as follows:
1) Shareholders - the founders who establish the bank.
2) Investors - those who invest their money in bank and the bank uses their money and gives them dividends according to their investment after deducting the salaries of workers and official charges.
3) Islamic supervisory board - its rule is to approve only the transactions that comply to Shari'a and to reject all activities not in accord with Shari'a.
The board of directors comprises some of the founders who hold periodic meetings to decide the policies of the bank and make required decisions about its operations.
There is a general body consisting of all the founding members, which appoints the members of directory board.
The Islamic bank conducts many activities, among them are the following:
1) Taking profit against purchases on behalf of someone else (2) Deposits. (3) Commercial papers. (4) Bond papers. 5) Guarantee papers. (6) Making drafts and transferring money. (7) Leasing lockers (8) Marketing in stocks and in foreign currency (9) Managing properties, inheritance, wills and Zakah.
For more details one should refer to the books written to elaborate how the Islamic banks acts. Here are some important references:
1) The resolutions passed by the Fiqh councils that discuss the contemporary Fiqh issues.
2) The books of Dr. Ali al-Saloos , professor at the faculty of Fiqh and al-Usool at Qatar University.
3) "Muamalaat Maliyah Mu'asirah" (contemporary financial transactions) for Dr. Muhammad Uthman Shabbeer .
4) The books of Dr. Ali al-Qarrah Daghi . Head of Fiqh and al-Usool Section at Qatar University.
5) Research works done by the members of Fiqh academy in Jeddah and Makkah.
6) The books prepared by some Islamic banks to explain their procedure.
Allah knows best.