Islamic banking operates strictly under the ethical, legal, and financial guidelines governed by Sharia law, prohibiting core practices such as the charging or paying of predetermined interest rates on loans and deposits. Instead of traditional interest-based lending, Islamic banks utilize risk-sharing and profit-and-loss-sharing models, asset-backed financing, leasing arrangements, and trade-based structures where the bank co-owns or purchases assets directly to resell or lease them to clients at disclosed profit margins, ensuring all financial activities remain socially responsible and compliant with religious tenets.