Islamic Window
An Islamic window is a Sharia-compliant business run inside a conventional financial institution — a division, branch network or product line — usually with segregated funds, accounts and Sharia governance.
Also called: Islamic banking window · Islamic window operation · Sharia window
Windows let a conventional bank serve customers who want Islamic products without setting up a separate subsidiary. Regulators that permit them typically require the Islamic business to keep its funds separate from the conventional book, to keep its own accounts, and to have its own Sharia Supervisory Board or committee.
Attitudes differ sharply between jurisdictions. Some regulators have encouraged windows as a route into Islamic banking; others have restricted them or required banks to move the business into a separately capitalised entity. Qatar's central bank ordered conventional banks to close their Islamic windows in 2011.
In practice
A window is only as compliant as its segregation. If Islamic deposits can fund conventional lending, or costs and income are not properly separated, the window carries significant Sharia non-compliance risk.
Commonly confused with
| Term | How it differs |
|---|---|
| Islamic bank | An Islamic bank is a separately licensed institution whose whole business is Sharia-compliant. A window is one part of a conventional institution. |
See also
- Sharia Supervisory BoardA Sharia Supervisory Board is the panel of scholars responsible for reviewing and overseeing an Islamic financial institution's compliance with Sharia — approving products and contracts, issuing rulings and reviewing whether operations follow them.
- Sharia Non-Compliance RiskSharia non-compliance risk is the legal, financial and reputational risk an Islamic financial institution faces if it fails to comply with the Sharia rules that apply to it — through a flawed product, a contract executed out of sequence or income it cannot keep.
- IFSBThe IFSB, the Islamic Financial Services Board, is a Kuala Lumpur-based international body that issues prudential and supervisory standards for Islamic banking, Islamic capital markets and takaful, much as the Basel Committee does for conventional banks.
- Bank CharterA bank charter is the authorisation that makes an institution a bank — granted in the United States either by a state banking department or by the federal Office of the Comptroller of the Currency. Deposit insurance and access to Federal Reserve services are separate approvals, not things the charter brings with it.