6. Islamic Financing in Practice

Islamic financing is an emerging alternative to conventional banking to meet the specific needs of Muslims for financial products and services that conform to the Syariah (Islamic law) principles. The demand of such products is not only limited to Muslims but among Non-Muslims as well. Islamic financing products are based on risk-sharing, underlying asset-based transactions, involvement in the process of trading, leasing and project financing and so on. Profit and loss sharing (PLS) is viewed as a prominent feature to promote justice and equity in the economy. The financing under Islamic banking from consumer credit to long-term finance for big investment projects is done through the sale or lease of real goods and services via the sales- and lease-based modes of financing (murabaha, ijarah, salam and istisna).