Discuss the presence of islamic banking in Palestine Essay - 1

Discuss the presence of islamic banking in Palestine - Essay Example g products as per the needs of the targeted population, investors in Palestine sought to address the need of having a banking system that would be in line with Islamic laws and practices. The main that the Islamic law prohibits is that of money accruing interest, which is factor that dates back to the time of Prophet Muhammad (El Tiby 2010, p. 7). The interest for Palestine to start Islamic banks began in 1990 when businessmen started to push for the idea. This process began by the Muslim businessmen establishing a Finance Company that was to operate on Islamic principles, because the Israeli authorities had refused to oblige to this request. The company was named the Beit Elmal Al Philisti that was licensed for operation on 22 February 1994. Presently, banks in Palestine are classified as either conventional or Islamic banks with 83 % being the percentage of the conventional banks while the rest are the Islamic banks in The region (Sabri 2009, p. 58). The Islamic banks operating in Palestine include the Palestine Islamic Bank, Islamic Arab Bank, Cairo Amman Bank and Al-Aqsa Islamic Bank that were established between 1995 and 1998 (Palestine Investment Fund 2014). The main challenge that banks face is the fact that they have to compete in the same market as banks that were established more than 60 years ago such as the Arab Bank. However, this has not deterred these banks from making profits because they also provide investment opportunities that are attractive to the markets they target. Additionally, investment opportunities are scarce making competition between banks to be stiff and making it hard for new banks to penetrate this market (Gompert et al 2001, p. 121). Islamic banks, however, got into business based on them developing products such as Mudaraba, Musharaka, and Murabaha that provided new investment opportunities (Askari, Iqbal & Mirakhor 2011, n.p). The banks also had to devise new pricing so that they could attract profits based on the commission