How does Islamic Banking work against normal banking?


banks make a profit by selling money to people like giving an individual 2000$ but he must return 2100$ later on, in Islamic banks such thing isn’t allowed and I don’t understand how they make any profit

In: 2

So basically it’s like this.

The bank buys the house, and then sells it to you at a rate a bit above market price.

They make a lot of profit, they just have their own ways around it. It’s smart actually.

They don’t charge interest, so you take a loan of $2000 and return $2000 of the loan. But the bank charges a service fee, from which they pay their costs, employees, operating expenses etc, and that can be an additional $100; so in total you pay “$2000 interest free loan + $100 service fees”.

They don’t charge interest but fees. It’s the same thing but this way they’re in the clear.

The Arab world gets around it by calling it pishkesh instead of usury. It’s basically a one-time bribe or fee instead of a constant percentage.

Some Amercian Muslim groups practice it as well and definitely makes it more affordable for new families to buy homes.

The scenario you described is allowed in Islam, what isn’t is a usury percentage that keeps ticking year over year.

Can non Muslims utilize Islamic banking if it is in their financial interest?