Islamic personal loans are a part of Islamic finance, and personal loans from Islamic banks in Malaysia are more widely known as personal Islamic financing.
Islamic banking adheres to Shariah, which is the Islamic religious law as defined in the Quran, hadith and sunnah. The difference between conventional and Islamic banking is that no money is actually loaned to the client as the bank will “buy” the item for clients and sell it back to them at a marked-up price. Islamic banking has the same purpose as conventional banking except that it operates in accordance with the rules of the Shariah, known as fiqh Al-Mua`malat (Islamic rules on transactions.)
Islamic banking is governed by both Islamic law and financial industry rules and regulations, so it is very tightly regulated, like its conventional counterpart. Islamic banks must comply with a variety of principles besides not charging interest, such as ensuring the products offered to clients are halal and Shariah compliant. In order to do so, there are Shariah boards which consist of Islamic scholars who are qualified to give opinions on Islamic financial products.