is only marginally concerned with the success of ventures it finances. In contrast, under profit-and-loss sharing (PLS) system Islamic institutions as well as their depositors link their own fate to the success of the projects they finance.

These differences make the two institutions totally different from each other. The two institutions operate in the same environment but with different modes of operation and opposite objectives

2.5 Methods of Financing

Islamic commercial law is in fact supported on four elementary principles. The fundamental of primary Islamic business principle is profit and loss sharing and the next is based on fixed service fees and charges and third is based on free of cost and no charges. The other principles are changing with the circumstances of the business and its operation. There are fundamental financing contracts which are Sharia compliant and have been developed for the practice of Islamic banks. The Islamic modes of financing are split up into two groups, which involve both the assets and liabilities sides of the bank’s balance sheets.

Fundamental modes which are based on the profit-and-loss-sharing (PLS) principle and comprise: Mudaraba (trustee finance), Musharaka (equity participation). Marginal modes which are based on mark-up principle and are non-PLS based, for instance, Qard-Al-Hasanah (beneficence loans), Bai’ Mua’jjal (credit sales or deferred payments sales), Bai’ Salam or Bai’ Salaf (purchase with deferred delivery), Ijara and Ijara-wa-iqt