Charles Schwab delayed by 20 mins. The basic principle in Islamic banking is that interest usury or Riba is prohibited. Thus Islamic banking is structurally similar to venture capital finance, non-recourse project finance or ordinary equity investment. The investor takes a share in the profits, if any, of the venture and is liable to lose his capital. It involves investing but not lending, and on a systemic basis is similar to the German, Japanese and Spanish banking systems rather than the British or American systems.
Islamic banking is all about taking risks and sharing that risk with the client.
Trading in government and corporate bonds and derivatives like stock options and future contracts are not allowed, nor is dealing in preference shares. The search for acceptable investments is balanced by a natural risk-aversion. Islamic borrowers also demonstrate a reluctance to give away a share in the profits of their enterprise. While they did not project themselves as overtly Islamic, these savings banks neither paid interest to their depositors nor charged interest to their borrowers, and invested mainly in trade and industry. The banks' depositors were paid a share of the profits of the borrowers, acting like savings and loan institutions rather than commercial banks.