Business Practices of Islamic Banks

Islamic banks, like other banks, attract financial resources from individuals and institutions and direct them towards business firms which need external finance to support their productive activities. Thus, Islamic banks also perform the same functions of financial intermediation as performed by the traditional banks. The basic difference between the Islamic banks and interest-based banks is in their functioning, i.e. how they raise financial resources and then use them. For the sake of analytical convenience, let us distinguish between the sources and uses of funds.

Source: Elimination of Riba, Khurshid Ahmad, Khalid Rahman and Zahed A. Valie. Republished with permission.