Islamic banks are banks that are operated based on the principles of Islamic or sharia law. The most important difference between Islamic banks and other banks is that Islamic banks strictly adhere to the norms of Islam.
In Islamic finance, there is what is known as (halal or halaal finance). It is a way of banking, lending and borrowing money in which loan interest (usury) is prohibited.
These principles include the avoidance of financial activities seen as forbidden (haram) by the Qu'ran. They include things like riba and usury.
In Arabic, Riba can be roughly translated as "usury", or unjust. It also means exploitating customers in trade or business under Islamic law. Riba is mentioned and condemned in several different verses in the Qur'an such as 3:130, 4:161, 30:39. The most commonly quoted verses include 2:275-2:280.
Riba is also mentioned in many hadith. Hadiths are reports describing the words, actions, or habits of the Islamic prophet Muhammad.
Surah al-Rum, verse 39 states that anything that is given with interest does not increase with God. “That which you give as interest to increase the people’s' wealth increases not with God; but that which you give in charity, seeking the goodwill of God, multiplies manifold.” (30: 39).
Also Surah al-Nisa', verse 161 states that charging of interest is forbidden for moneylenders. “And for their taking interest even though it was forbidden for them, and their wrongful appropriation of other people’s property. We have prepared for those among them who reject faith a grievous punishment (4: 161)”
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