My dear before arguing about Islamic banking, We need to understand the traditional banking, going on in the world including Pakistan.

It is well known to every Muslim that Interest is strictly prohibited in any form by our Lord. In Pakistan after the Zia's era many economists, bankers and sharia experts who were feeling the necessity of corrective measures to restore the actual spirit and soul of Islamic finance tried their best. in this respect a petition was filed in sharia appellate bench of supreme court of Pakistan headed by Justice Taqi Usmani and other Islamic law and finance experts.

In his historical verdict which is globally accepted and being followed in the world, the current banking system declared as full of interest.

In 2002, Meezan bank (Islamic bank) started its operations and doing profitable business in Islamic way till today.

As i said that we need to understand traditional banking 1st then Islamic banking let's see why?

Our whole life is based on contracts whether social or commercial. In our religion purity of contract (ahad) have great importance. Marriage is a social contract contains some restrictions for both parties, similarly for Muslims there are some restrictions for commercial contract as well.

Besides Interest there are so many evils in traditional banking but our core focus here is interest. let's see how it exist in traditional banking and not in Islamic banking.

In commercial transactions on of the cause of creation of Interest is Liability or Debt. the traditional banking contract whether it is saving or current account is based on the relationship of debtor and creditor. We i.e. depositors are creditors and bank act as debtor.

Debt means it is guaranteed to repay the creditor in any case. traditional banking saving and current accounts grantees the repayment of your deposited amount in any case with profit i.e. interest.

According to Quran and Ahadis any addition over debt is known as Riba i.e. Interest. but the Islamic banking contract is on the basis of Profit and loss Islamic bank work as the Fund manager not debtor. On the principle of Modaraba contract you can say a fund management contract. which have very special significance over traditional banking contracts. Also on asset side the whole investment is based on creation of assets. The profit generated, then distributes among depositors and banks as prescribed ratio.

This is the very grass root level difference. there are also very huge differences. If you are interested then you should read Judgement on Riba by Justice Taqi Usmani.

All over the world Islamic financial institutions constitutes around $ 250 Billion and growing at 25+ percent speed. In Pakistan it constitutes 5.4 percent of over all banking industry and going to achieve 12 percent share in 2012.