A. Introduction
Islamic banking is often thought to be financing the needs of the Muslim community only. In fact, it really refers to a system of banking activity that is consistent with Islamic principles and following the Islamic economics. With the rapid growth of the world-wide economy along with the expanding economy in the Islamic countries, Islamic banking is evolving to play a vital role in the world. The principles of Islamic banking differ substantially from those of conventional financing by traditional financial institutions. Islamic principles prohibit usury, the conducting any business involving Riba (interest), i.e. collection or payment of interest, under the Syariah law (Islamic law). Therefore Islamic banks were, during the Middle Ages, functioning essentially as savings institutions rather than commercial banks.
