Modern Islamic banking follows Islamic law according to the boards of Shariah scholars which differ between the conservative Middle East and more accepting South East Asian regions but the fundamentals remain the same: interest is banned and banks operate on a system of profit loss sharing (PLS).
Loans involve the bank purchasing a commodity at market value and then selling it to the customer at a higher price with the bank keeping the difference. Similarly, interest is not paid on deposit accounts but investors share in the profit of the bank at a level set to compete on the conventional market………………………………………..Full Article: Source