Islamic banking, rooted in Sharia law principles, offers financial services that comply with Islamic ethics. There are various types of Islamic banking, each with its unique features. One of the prominent types is Musharaka, which involves a partnership where both parties contribute capital and share profits and losses. Mudaraba is another form, wherein one party provides capital, and the other party manages it, sharing profits based on a pre-agreed ratio while bearing losses alone.
Murabaha is a prevalent Islamic financing structure, resembling a cost-plus sale. In this arrangement, the bank purchases the desired item and sells it to the customer at a marked-up price, allowing the buyer to pay in installments. Musawama is a type of trading where the seller and buyer negotiate the price without disclosing the seller’s cost. Additionally, Islamic banking includes leasing, where the bank purchases an asset and leases it to the customer for a predetermined period.
Salam and Istisna are other forms of Islamic financing. Salam involves advance payment for goods to be delivered at a future date, providing liquidity to the seller. Istisna, on the other hand, is a contract for manufacturing goods where the buyer specifies the details and pays progressively as the work progresses. Each of these types of Islamic banking serves specific financial needs while adhering to Islamic principles.
(Response: There are seven main types of Islamic banking, including Musharaka, Mudaraba, Murabaha, Musawama, Leasing, Salam, and Istisna.)