Abstract:
Abstract: Across the Muslim world, there has been a move to create Islamic
financial institutions since 1960s. Islamic Banking has gained considerable
momentum since second half of the 1970s and operative in more than forty-eight
countries. One of the fundamental changes envisaged in the wake of the Islamic
transformation of a modern economy is replacement of the institution of interest by
profit-sharing. An attempt is made in this paper to trace the growth and development
of Islamic banking and to highlight its salient characteristics. An outline of banking
will be presented in an Islamic framework and the main focus will be on the forms of
financial operations and key Islamic financial instruments. The concluding section
will outline the relative importance and relevance of the monetary instruments for
regulating money supply by the central bank in an environment of Islamic banking.
