Specifics of Managing Financial Instruments in Islamic Banks

Abstract

This professional paper aims to bring closer to readers the basic characteristics and business features of Islamic banks as well as islamic financial instruments. Islamic banking has proven to be a potential and, above all, ethical, alternative method of banking worldwide. The transactional prohibition of collecting and earning interest is the most important prominent  feature of Islamic banks. In other words, it is inadmissible that 'money create money' without the labor and the real sector effort. Islamic banks consider ethical responsibility on the supply side and thereby supply the market with an offer-based on trust. The most important characteristics of Islamic banks are participation and guarantees. Islamic banks perform with two major types of contracts: non-participatory or asset-based (murabahah, ijarah, istishna and salam) and risk-sharing/participatory or equity-based (musharakah, mudarabah).