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The rate of growth of Islamic banking is very fast, but still many people do not understand the principles that apply in Islamic banking. No wonder if there is a majority of people who still doubt the principles of Islamic banking. The principle is the rule of Islamic law based on agreement between the bank and others to deposit funds and financing activities or other activities in accordance with Islamic law.

Here are five principles embraced by the law arrives Islamic banking system:

1. Payment of loans with different values of the loan value with the predetermined value is not allowed.
2. Provision of funds must also share the profits and losses as a result of the institutions that borrow funds business.
3. In principle Islam does not allow making money from money. Money is only a medium of exchange and not a commodity because it has no intrinsic value.
4. The element of uncertainty or speculation (Gharar) not allowed. Therefore, both parties must know all too well the results of which will they gain from a transaction.
5. Investments should only be given to those businesses which are not forbidden under Islamic law. For example, businesses in the liquor trade should not be funded by Islamic banking.

In the end, the principles of Islamic banking would bring good for the communities as a promising balance its economic system. Islamic banking has been regulated within the range of transactions that are not harmful for both parties. Because if the transaction is detrimental to one party violates the provisions of Islamic law has been used as the foundation of Islamic banking principles derived from Quran and Hadith.

The vital function of banks is as intermediary, which acts to receive deposits from customers and lend it to other customers in need of funds. For conventional banking, the differences about the amount of interest charged to the borrower of funds in exchange rates given to the depositors that the biggest source of profits. Glance it seems the role of conventional banks have been able to fulfill the function of mobilization and channeling of public funds in line with the two principles above. The question then is: why are there still must be Islamic bank?

Differences with Conventional Bank and Islamic Banking

Islamic banking system differs from conventional banking system due to financial and banking system is a subsystem of an Islamic economic system is broader in scope. Therefore, Islamic banking is not only required to generate commercial profit, but required to show the realization of truly Islamic values.

In the conventional banking activities which are prohibited by Islamic law, such as receiving and paying interest (riba), finance the activities of production and trade of goods such as liquor forbidden (haram), activities that are very close to gambling (maisir) to certain transactions in foreign exchange dealing, as well as highly speculative and intended transaction (gharar) in investment banking.

The purpose of the establishment of Islamic banks is generally is to promote and develop the application of the principles of Islam, sharia, and traditions into the financial transactions and banking and other businesses related to the people avoid these things, even though Islam is not one The only religion which prohibits interest payments. Opposite to interest even to have occurred since ancient Greece, both by Aristotle and Plato. In the Old Testament, the prohibition of riba can be known from Leviticus 25: 27, Deutronomi 23: 19, Exodus 25: 25 and in the New Testament can be found in Luke 6: 35.

The main principles adopted by Islamic banks are: 1) prohibition of riba (interest) in various forms of transactions; 2) run a business and trading activities based on a legitimate gain according to sharia, and 3) develop the charity. Throughout the conventional banking practices do not conflict with Islamic principles, the Islamic banks have adopted the system and the existing banking procedures. However, if there is a contradiction with the principles of sharia, the Islamic banks plan and implement their own procedures in order to adjust their banking activities with Islamic Sharia principles. Therefore the Sharia Board function is to provide input to the Islamic banking to ensure that Islamic banks are not involved in the elements that are not approved by Islam.

Deposits in Islamic banks managed by an investment or mudaroba’ way, so commonly known as the Deposit Mudharaba’. Bank Syariah not pay interest on customer deposits to pay the deposit but the profit sharing has been determined by the ratio (the business benefits for each party, the amount determined by agreement). Several types of savings futures also managed in a way such mudharobah education savings and retirement savings, savings pilgrimage, this term savings commonly known term Mudaraba’ Education Savings Accounts, Savings Hajj. These savings cannot be withdrawn by the owner of the funds before the maturity date so qualified to invest.

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