Islamic Finance: Basic Principles and Contributions in Financing Economic

Abstract The aim of the study is to present the basic principles which guide the financial activities and operations within an Islamic bank and to see how the Islamic banking activities diverge from a conventional bank. Our purpose is also to show how Islamic banks may contribute to provide financial services to the real economy. The idealistic basis of an Islamic financial system exceeds the simple interaction of production factor and economic behavior. It can be completely respected only in the case of Islam’s directives on the business ethics, wealth distribution, social and economic justice and honesty, and the role of the state. While the conventional economic vision focuses principally on the economic and financial aspects of operations, the Islamic economic doctrine focuses on the ethical, moral, social, and religious dimensions, to improve equality and fairness which are the values of Islamic commandment and its practical application via the development of Islamic economics. It is not necessary that the parties of an Islamic financial contract be Muslims; however, they should respect the ethical norms and values emphasized by Islamic law (Shari’ah).