19/04/2026
ISLAMIC BANKING PRODUCTS VS CONTRACTS
Did you know that “Islamic banking products” are not the same as “Islamic banking contracts”?
A product is what the customer needs, such as a mortgage for a housing solution. A contract is the Shariah-compliant method used to deliver and operationalise that product.
In practice, many conventional banking products can be adapted for Islamic banking by applying the right contract.
Take a mortgage as an example. In conventional banking, the bank lends you money with interest so you can buy a house, which is then used as collateral.
In Islamic banking, the transaction must involve a real asset, not just money. So the same mortgage need is structured differently.
Under Murabaha, the bank buys the house and sells it to you at a profit, which you pay over time in installments.
Under Diminishing Musharakah, you and the bank jointly own the house. You pay rent for the bank’s share while gradually buying it out until you fully own the property.
The key point is this: the mortgage is the product, while Murabaha and Diminishing Musharakah are the contracts that make it Shariah-compliant by removing interest.
