I know that Islamic Banking involves the prohibition of interest based loans. But how do Islamic Banks make profit if they charge no interest?

  • 4
    Basically they work your money and take share of profits. It is not techinacally interest.
    – user44
    Commented Jul 15, 2012 at 3:53
  • In 14th century Europe, when Christians forbade usury, the banks got around it by lending money in different currencies and fiddling the exchange rates.
    – TRiG
    Commented Jul 17, 2012 at 17:32
  • @TRiG Please provide references, just to know how banks can play around.
    – bjan
    Commented Dec 16, 2013 at 8:41
  • @bjan. My source is a BBC Radio 4 programme called "The Long View".
    – TRiG
    Commented Dec 16, 2013 at 9:51
  • How can a bank even be Islamic or Christian? It's like saying that a car is Christian or Islamic.
    – Tony Stark
    Commented Jul 9, 2015 at 18:12

4 Answers 4


A traditional bank makes money by lending people money and charging interest on that. And they provide various services and charges money for that also. Again they take money from other people and pay them interest, with lesser rate.

An Islamic bank also lends money to people. But it is kind of a business agreement between the bank and the borrower. The borrower will run the business while bank will look over. The profit of that business will be shared between the bank and the borrower in a prefixed rate documented earlier in the agreement. Islamic bank also provide services and charge money.

When people keep money in an Islamic bank, they become kind of share-holder of the bank's overall business. And share profits in a prefixed rate. Sometimes, a person can invest in a specific project and profits will be calculated specifically for that project.

  • -1: This post only really covers a subset of Islamic banking, which is in itself fairly diverse. While not a bad answer (per se) in that it is a good description thus, it is too incomplete to be useful.
    – goldPseudo
    Commented Dec 12, 2012 at 23:40
  • Do we also have loss in the bank account on putting money in the Islamic bank? Asking because I never had a loss. Its been around 2 years.
    – user46
    Commented Jul 25, 2016 at 8:11
  • If islamic banks take a share of a business profit, what do they do when the said business is at a loss? do they take the risk?
    – user23906
    Commented Aug 17, 2017 at 13:37
  • Yes they also share the loss.
    – Gulshan
    Commented Aug 17, 2017 at 13:59

the idea behind progibiting usary primarily was to discourage the holding power of money. to be really honest i find islamic banking as more or less the same thing its just playing with the concepts to do exactly the same thing " considering that compond interest is not prevalent any more .....conventional banking and islamic banking are doing the same thing- Al azhar university therefore has made conventional banking as halal - i we really think if we need to have a purely islamic economic system we have to follow the model Col gaddafi formulated for african union - only then an islamic bank can exist ....in a haram economic system a halal institution can not be established!


Working of Islamic banking and conventional banking are quite different with one another. In Islamic Banking the concept of profit sharing, ownership and risk bearing matters are the vital elements of Islamic banking that differentiate it from the conventional banking.

  • 2
    Welcome to Islam.SE! Answers are generally expected to be verbose and well-cited with proofs. Please update your answer accordingly.
    – ashes999
    Commented Oct 11, 2012 at 15:54
  • Well, I like non-verbose answers, but proofs/citations are still needed.
    – Muz
    Commented Oct 12, 2012 at 8:09

As far as major principals of Islamic Banking Framework are concerned, other answers may be correct because the framework designed by the Sharia board of a bank may differ with the other one. Some scholars may agree with Sharia board's guidelines and some may not and even some consider it Haraam at all, see this. So one can not consider all Banks(labelled as Islamic) as Islamic Bank on the basis of one Islamic Bank's guidelines/framework. If you believe in the scholars of Sharia Board you may believe in the Bank as Islamic otherwise you won't.

Having said that, Yes, Islamic Banks make money via Mudharabah, Wadiah, Musharakah, Murabahah and Ijarah and other services. They don't deal in Interest at all based on their framework.

But, Islamic Banks may make money via Illegal and/or Haraam businesses.

[Disclaimer: I don't have any proofs]

Why would i even think of it? Just because i believe in that Banks are involved in Money Laundering, playing dirty games in poor countries, funding wars, doing interest related businesses without telling their business partners i.e. Us, etc.

Moreover, they don't provide any sort of facilities that a Business partner/I/Account holder could acquire all their transactions and business deals documents to ensure their money-making-means are legal and halaal.

One may not agree with my personal believes, otherwise, doing business with such banks under the label of Islamic Banking would make his/her profits Haraam.

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .