THE ROLE OF RELIGION IN BANKING BUSINESS IN ISLAMIC LAW
THE ROLE OF RELIGION IN BANKING BUSINESS IN ISLAMIC LAW

Author(s): Ranko P. Sovilj, Sanja Stojković Zlatanović, Ivana M. Ostojić
Subject(s): Economy, Politics and religion, Socio-Economic Research, Sociology of Religion
Published by: Институт друштвених наука
Keywords: Islam; banking; Islamic banking; prohibition on interest; sharia
Summary/Abstract: In recent decades, the world is rapidly developing Islamic banking, as well as specific types of banking, in addition to conventional banking, as the prevailing concept of operations of banks around the world. In contrast to conventional banking that is primarily focused on profiting, Islamic banking is based on the principles of justice and fairness, in order to achieve equality in society, for the benefit of society as a whole, and in the spirit of learning Islamic religion. Islamic banking is based on Islamic law and that of the Islamic faith. Referring to the basic sources of Islam - the Quran and the Sunnah, the concept of Islamic ban- king, which is theoretically justified Sharia prohibits certain institutes such as interest; risk; uncertainties; deception; hazard, etc. Considering that interest (riba) is forbidden by the Quran, the profit and loss sharing principle, as well as partnership relations in mutual busi- ness ventures, constitute the core operations of Islamic banks. Since the interest loan is prohibited, the Islamic banks are prohibited to avoid jobs involving excessive speculative risk (Gharar). Also, Islamic banks are forbidden to finance activities that are considered harmful, or immoral for Muslims (e.g. the production and distribution of alcohol and alcoholic beverages, drugs, weapons, pork meat, organizing games of chance, dealing with pornography). The duty of the Islamic bank, as well as every Muslim, is the separation of zakat, a kind of religious tax. The obligation of the zakat is based on the interpretation of the nature of the property in the Quran. Since Islamic banks are profitable institutions, like the conventional banks, specific ways of doing business are designed by Islamic law and morality (e.g. mu- rabaha, mudaraba, musharaka, istisna, ijara).

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