While the world is going through the global financial crisis that began in 2008 in the United States with the collapse of banks, analysts are giving different opinions and formulating new economic hypotheses on the origin economy, as well as the process of several countries that escaped the crisis. Among all these new “theories”, the case of Islamic banking is interesting due to its nature and consequences. In my essay I will try to highlight the fundamental principles of Islamic finance, the reasons for the restriction of interest, the most important tools used by Islamic banks in economic activities and a brief explanation of the same, and finally my point of view on the probable future improvement of the Islamic financial system. First, let's describe how Islamic banks actually work and what their main differences are compared to conventional banks. In this banking system, banks are operated according to Islamic laws (known as Sharia), so Islamic economic principles are considered as primary guidance. Two fundamental doctrines underlying Islamic banking are the sharing of profits and losses and, above all, the prohibition on collecting and paying interest. So, unlike conventional commercial banks, Islamic banks do not pay or charge interest on loans or borrowing money. This is because Sharia strictly prohibits, among other things, the receipt and payment of riba (interest)/. Interpretations to clarify the meaning of this restriction suggest that earning or charging an extra amount of money from the debtor should be seen as immoral behavior, because putting pressure on the borrower is actually unfair from the point of view of Islam. To be clear, the Islamic religion fundamentally promotes the principle of justice… middle of the paper… fitness. So, in terms of risk management, Islamic banks are more reliable. Furthermore, with the growing population of Muslims around the world and recent economic theories demonstrating the advantages of Islamic banks over traditional banks especially during difficult times, I believe that the new financial system based on Islamic principles will play a very important role in near future. Works Cited http://www.investopedia.com/terms/i/islamicbanking.asp (accessed 10/10/2013 November) RAA Karim / The International Journal of Accounting 36 (2001) 169–193 (p .178) Islamic Economic Studies Vol. 12, no. 1, August 2004, EFFICIENCY IN ISLAMIC BANKS: AN EMPIRICAL ANALYSIS OF EIGHTEEN BANKS, p.1 Islamic Economic Studies, vol. 8, No. 2, p.2Mufti Muhammad Taqi Usmani, An Introduction to Islamic Finance, p.31Ibid., p. 31-33Ibid., p.20Ibid., p.65