TABLE OF CONTENTS
DECLARATION ........................................................................................................................... 5
APPROVAL ................................................................................................................................... 6
DEDICATION ............................................................................................................................... 7
ACKNOWLEDGEMENT ............................................................................................................ 8
LIST OF STATUTES .................................................................................................................... 9
CHAPTER ONE .......................................................................................................................... 11
1.1. Background to the Study .......................................................................................................... 11
1.2. Statement of the Problem ......................................................................................................... 14
1.3. Research Questions ....................................•..•...........•............................................................... 15
1.4. Objectives of the Study .......................................................................•..................................... 15
1.4.1. General objective ............................................................................................................... 15
1.4.2. Specific objectives .............................................................................................................. 15
1.5. Geographical Scope ...............•................................................................................................... 16
1.6. Research Methodology .............................................................................................................. 16
1.7. Literature Review ...................................................................................................................... 16
1.8. Research Layout ........................................................................................................................ 25
CHAPTER TWO ......................................................................................................................... 26
CRITICAL EXAMINATION OF LAWS THAT GOVERN ISLAMIC BANKING ............ 26
2.1. Introduction ........................................................................................................................... 26
2.2. Riba and Principles Governing It ........................................................................................ 28
2.3. Rationale for the Prohibition ofRiba .................................................................................. 29
2.4. Islamic Finance Principle ..........................................................................•.......................... 30
2.4.1. Murabahah ........................................................................................................................ 31
2.4.2. Ijarah .................................................................................................................................. 32
2.4.3. Diminishing Musharakah ................................................................................................. 32
2.4.4. Bai Salam ........................................................................................................................... 33
2.4.5. Bai Mu'ajjal ....................................................................................................................... 33
2.4.6. Istisna'a ......................................................................................................•....................... 33
Islamic banks, hence, are considered unique compared to other banks as they exclude interest from their transactions, and instead social responsibility becomes their main concern as the theory of Islamic moral economy suggests. Hence, overall there are many characteristics of Islamic banking and according to AI-Tayar and Asutay the most important are as follows, Interest-free transactions are unique to Islamic banks, they focus on development through investment compared to commercial banks, which provide loans for interest, Islamic banks invest in various ways, e.g. direct investment or investment through partnership whereby the bank becomes a partner in the business by sharing its profits and losses; thus, IBF operations are marked with profit-and-loss sharing, and hence risk sharing mechanisms, the role of money in
