How does system differ from a system based on interest

Reference no: EM13237062

In Islamic banking, sharia (interest) is banned, while profit-sharing is not banned. Consequently, an example of an Islamic-sound banking practice is a system in which depositors deposit money to participate in profit-sharing and the banks provide funds to borrowers on the same principle with a mark-up as payment for their financial services.

A) How does this system differ from a system based on interest?

B) Why might the system of interest be considered exploitative but not a system based on profit-sharing (in moral and/or religious, not economic, terms)?

Reference no: EM13237062

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