WASHINGTON (Sputnik) — A set of regulatory standards is being developed to promote the safety and stability of Islamic banks, including a legal framework to prevent terrorist financing, the International Monetary Fund (IMF) announced in a press release on Tuesday.
"[IMF] Directors called for stronger efforts to establish a policy framework and environment that promote financial stability and sound development of Islamic banking, particularly for countries in which Islamic banking has become systemically important," the release stated.
"There is a need for putting in place an environment that promotes IB [Islamic banking] financial stability and sound development, including legal, prudential, financial safety nets, anti-money laundering and countering the financing of terrorism and liquidity management frameworks," the release explained.
Islamic banks follow a prohibition in the Quran against interest payments to depositors and interest charges to borrowers.
Under Sharia law, Islamic banks often act as intermediaries instead of providing conventional home mortgages and other financial products. The bank will purchase the house and then sell the house to the eventual owner, at a profit, while allowing the owner to repay the bank over time.
