Islamic banking refers to a system of banking or banking activity which is consistent with Islamic law (Shari'ah) principles and guided by Islamic economics. In particular, Islamic law prohibits the collection and payment of interest, also commonly called riba in Islamic discourse. Generally, Islamic law also prohibits trading in financial risk (which is seen as a form of gambling). In addition, Islamic law prohibits investing in businesses that are considered haram (such as businesses that sell alcohol or pork, or businesses that produce un-Islamic media). In the late 20th century a number of Islamic banks were created, to cater to this particular banking market.

Islamic banking has the same purpose as conventional banking except that it claims to operate in accordance with the rules of Shari'ah, known as Fiqh al-Muamalat (Islamic rules on transactions). The basic principle of Islamic banking is the sharing of profit and loss and the prohibition of riba´ (interest). Amongst the common Islamic concepts used in Islamic banking are profit sharing (Mudharabah), safekeeping (Wadiah), joint venture (Musharakah), cost plus (Murabahah) and leasing.