Islamic Banking and Finance: Fundamentals and Contemporary Issues

Attitude of Customers and Bankers towards Islamic Banking in Bangladesh

Investment Mechanism of Islamic Banks Investment Mechanism of Conventional Banks
original price.
‰ The final price of the commodity, which includes
the price of the commodity paid by the bank to
the original seller and the bank's profit with other
incidental costs, is deferred to a payment on an
installment basis.
‰ The sale item is in the possession of the bank
before sale to the client.

in the name of the

borrower.

‰ Interest is usually calculated

and charged quarterly.

x Bay[-Mu’ajjal
‰ It is a sale contract in which provision is made for
an immediate delivery of goods, while the
payment of the price is postponed to a later date.
The client approaches the bank for financing the
purchase of goods. The bank purchases the
required goods and resells them to the customer
at an agreed price to be paid later.
‰ The agreed price includes the cost of goods to the
bank plus the bank's margin of profit with other
incidental costs.
‰ The customer is required to pay the agreed price
on due date.

x Cash Credits

‰ It is made through a

separate cash credit

account.

‰ The bank allows the

borrower to draw cash up

to the limit of the credit by

issuing check.

‰ Interest is charged on the

daily balance of the

account.

‰ It is a revolving credit

facility.

x Ijarah
‰ Bank maintains a number of various assets (with
high degree of marketability) to respond to the
needs of different customers.
‰ Banks lease these assets to any party to utilize for
a term to be agreed upon.
‰ After the termination of the lease period, the
assets are returned to the bank and the bank looks
for a new lessee.

x Overdrafts
‰ The bank allows the
borrower, under this
arrangement, to overdraw
the current account, i.e., to
draw money in excess of his
credit balance, up to a
certain limit.
‰ A check book is issued to
the Borrower and he can
draw check up to the limit
of the agreed amount.
‰ Overdraft facility is allowed
against the securities like share
certificates and government
promissory notes.
x Bay[-Salam
‰ Salam is a sale of commodity, the delivery of
which would be in a future date for cash price.
‰ Price is advanced in cash to the seller, who makes

x Purchase or Discount of

Bills

A customer at the time of

opening a Letter of Credit signs