The reason why conventional banking charges interest rate to borrowers is because it has to pay interest to depositors. Islamic banking deceivingly takes adaptive reform approach to circumvent riba (interest) by substituting an interest-bearing loan into multiple trade transactions. Yet, the trade transactions are not inter-independent and “mechanically arranged” to eliminate 100% of the trading risks as banks are prohibited from trading activities in the first place. Notwithstanding this, Muslims around the globe have no other choice but to adhere to the current adaptive reform. The growth of Islamic banking shows the dire need for shariah (Islamic law) compliant products despite its shortcoming. That is the reason why many Islamic scholars are looking for a better solution in combating riba in the banking system in which the depositors gain at the borrowers expense. This empirical analysis proposed Zakat banking to take transformational reform approach to riba in banking by synthesising zakat into qardan hasana (interest free loan). It starts with the concept that depositors are obligated to pay zakat 2.5% per annum on their deposits instead of gaining interest as in conventional banking or “profit” as in Islamic banking. Depositors then allow Zakat banking to acts as an Amil (zakat collector) to collect zakat and channels the money to the authority after deducting 1/8 of the bank's entitlement. This makes Zakat banking costs of fund equal to zero; therefore, it can lend the balanced deposited pool of money to borrowers at zero rate of interest. In short, when the depositors pay zakat, the borrowers will enjoy qardan hasana. Conversely, to make profit, Zakat banking would charge on competitive basis for the various value added payment systems such as money withdrawal, money transfer, account keeping etc. instead of relying on the interest spread between depositors and borrowers.

Keywords; Riba, Zakat, Qardan Hasana, Islamic Banking and Islamic Economic.

There are two types of banking systems functioning in Pakistan. They include conventional and Islamic banking systems. Individuals take decisions to invest in a particular banking system while considering socioeconomic, religious and psychological factors. The present study is designed to examine factors affecting individual's investment decision in Islamic banking. The study uses cross-sectional data collected from Vehari district of the Punjab province. A total of 150 respondents were selected randomly having accounts or availing any other type of banking facility from conventional and Islamic banking. We used a 5 point Likert scale for getting information on customer satisfaction. The study considers social, religious and psychological factors having influence on individual's investment decision. Logit model was employed to determine factors affecting the decision of individuals in making investment in a specific banking system. The study provides insights on factors inducing individuals to make investment in a particular type of banking system. Age and education of respondents, whether banking is according to Islamic principles, ethical responsibility, wide range of Islamic products and networks are statistically related factors affecting decision on making investment in Islamic or conventional banks. Results of the study are useful for concerned banks to attract individuals to purchase the products.

The Capitalist system has undergone numerous crises in its history. The Financial Crisis of 2007-2008 shook the International Financial architecture raising questions as to what was inherently wrong with the system. Islamic Finance offered solutions to the problems confronting the financial system. This study analyzes three crises; Black Wednesday 1992-the currency crisis that shook Britain; East Asian Currency Crisis and the Financial Crisis of 2007-2008.The causative factors of these crises have been isolated and studied under the light of Islamic Finance principles. This is a theoretical and analytical paper and is unique in analyzing the Black Wednesday Currency Crisis in the light of Islamic Finance principles. The study shows that the underlying causative factors of the three crises are in violation of the principles of Islamic Finance. The main causative factor behind the Currency Crises is shown to be the ability to carry out a Speculative attack which is possible due to the facility of short sales. The study shows that short sales are contrary to the teachings of Islamic Finance. Likewise, the role of speculation in the 2007-2008 crisis is also highlighted along with the other causative factors. The study concludes that if the causative factors isolated in the three crises, which are in violation of the rules of Islamic Jurisprudence and still persist in the system, are removed from the International Financial Architecture then this system would be given great stability and the chances of a further crisis would significantly diminish.

Keywords: Financial Crisis, Interest, Gharar, Speculation, reserves

The paper discusses Murabaha which is among the most significant financing tools in cotemporary Islamic banking practice. The research study is was carried out to assess the opinions and suggestions of Islamic bankers regarding Murabaha as a vital Islamic finance tool and to infer and deduce conclusions that have significance with reference to murabaha by assessing the viewpoints of Islamic bankers. The study attempts to discuss the key factors pertinent to Murabaha financing mechanism and is based on a survey research involving Islamic bankers serving at the five purely Islamic banks operating in Pakistan. The study would provide an insight regarding a highly vital and one of the most utilized tools of Islamic financing throughout the Islamic finance industries globally. The research study endeavors to identify the key factors that are pertinent with regards to Murabaha financing and to explore options to expunge the adverse perceptions regarding Murabaha-based products and services.

Keywords Islamic Banking, Islamic Finance, Murabaha, Perceptions, Pakistan, Bankers

The impact on sukuk rating imposed by the financial measures, earnings management, and the sukuk structure has been considered by this research study by taking the sample from Pakistan. Financial measures, earnings management, and sukuk structure are the independent variables whereas the sukuk rating is taken as the dependent variable. Financial measures include financial leverage, profitability and issue size; earnings management include the return on assets, firm size and firm age and the sukuk structures undertaken are the musharakah, mudarabah, murabahah and ijarah. This study is conducted on the Pakistani firms that have issued sukuk. Correlation and regression model has been applied. Annual reports of all those firms that issue sukuk which are listed on the rating agency i.e. Pakistan Credit Rating Agency has been taken which has been subject to numerous selection standards. It has been postulated that financial measures, earnings management and sukuk structure have significant influence on sukuk rating and these significant influences have been confirmed by the results of the study. The data has been taken for the period of 2011 to 2015. Ordered logit regression model has been used in this study. Financial measures indicator that is financial leverage has positive influence on sukuk rating whereas profitability and also size of issue i.e. issue size have negative influence on sukuk rating. The indicators of earnings management that are return on assets, firm size and firm age have negative influence on the sukuk rating. Sukuk structure is found to have negative influence on sukuk rating. This study can be further continued by researchers with behavioural finance variables and by keeping control on to the financial measures, earnings management and sukuk structure; sukuk ratings can be improved which would persuade investors to invest in sukuks in Pakistan.

Key Words: Financial Measures, Earnings Management, Sukuk Structure, Sukuk Rating