Vol. 2, Issue 2, Part A (2020)

Islam is a comprehensive religion which have integrated and relevance principles which ties with all the branch of life. Economic problems are as much interest to Islam as it circulates the life. Islamic Finance is financing activity that complies with Islamic laws and its practical application through the development of Islamic Economics. Islamic finance arises from the desire of Muslims to repute their finance in accordance with requirements of faith. Accordingly, the Islamic way of life as derived from the Quran and the tradition of the prophet Mohammed (S) is expressed in the form of ordinances and rules known as Sharia. Islam has its own unique economic system. The last revelation to humankind-Quran, brought to Muslims a pious code for financial deals with each others. But it has faded and many western Economic systems had arrived. The economic system, however communism, socialism or capitalism cannot provoked effectively or they were ineffective in nature. The mobilization of deposits in Islamic finance and banking is through Contracts permissible by the Sharia. Islamic Financing Contracts are derived from the practice of Prophet Mohammed (S) community in Madinah which are known as Classical Financing Contracts and others which are practiced in contemporary Islamic Financing known as Hybrid Contracts. Throughout this paper, the comparison between the Islamic Economy and Western Economies is shown and the diverse Contracts have been highlighted and reviewed. The paper shows how these Contracts are formulated and how the Islamic Financing principles are reflected in legal terms and how it can be a strategy for Development.