Modern Islamic Banking

CHAPTER 5Application of Islamic Products in Retail Finance

Retail financial services for Islamic banks are typically offered in the same way as for conventional banks. Islamic banks have banking halls, automatic teller machines and offer debit cards, credit cards and chequebooks with current accounts. Modern means of banking such as telephone and online banking and text messaging services are also considered to be part of the package.

Retail clients are not only those who are served by the banks that are referred to in the UK as “high street banks”, but equally encompass high net worth individuals who have requirements for similar types of products.

5.1 Current Accounts

One of the basic banking requirements for retail and corporate clients alike is the current account, which allows a client to receive and pay funds and is usually the entry point into a banking relationship. Although the total offering varies from bank to bank and from country to country, current accounts tend to be accompanied by additional facilities such as debit cards, credit cards and chequebooks as well as online and telephone banking facilities and other features of modern current accounts.

In Islamic finance, current accounts are mainly offered using either of the following structures:

• qard al hassan; or
• amanah or wadia.

Qard al Hassan

The qard al hassan is an interest-free loan, historically provided for charitable purposes. Often the qard al hassan is intended to assist with matters such as the ...