Islamic banking system, why it is not purely islamic? and what is the solution?
Islamic banking is designed to follow Shariah principles —mainly the prohibition of riba (interest), avoidance of excessive uncertainty ( gharar ), and emphasis on risk-sharing. In theory, it’s a distinct ethical system. In practice, though, many scholars and critics argue it isn’t always “purely Islamic.” Here’s a clear, grounded breakdown of the main concerns: 1. “Interest in disguise” criticism Many Islamic financial products (like Murabaha , cost-plus financing) replicate the economic outcome of conventional loans. Instead of charging interest, the bank buys an asset and sells it to the customer at a marked-up price (payable in installments). Critics argue: ➤ The markup often closely tracks conventional interest rates (like LIBOR/SOFR benchmarks). ➤ So functionally, it behaves very similarly to interest-based lending. 👉 Result: Some say it complies in form , but not fully in spirit . 2. Weak risk-sharing in practice True Islamic finance emphasizes profit-and-l...