The Holy Quran ordains that: "O ye who believe! Fear God, and give up what remains of your demand for usury, if you are indeed believers." (Al Baqarah: 278). Allah then reminds those who continue to practice usury of the dire consequence of such practice by saying: "If ye do it not, take notice of war from God and His Apostle: but if ye turn back, you shall have your capital sums, Deal not unjustly, and ye shall not be dealt with unjustly." (Al Baqarah: 279).

It was narrated that the coming of the verses relates to two particular companions of the Prophet, namely, Abbas Bin Abdul Mutalib and Othman Bin Affan who were involved in the practice of usury then. They used to lend dates to other people until the next harvesting season. As the harvest for that particular season was not as good as expected, the borrowers were unable to pay back the borrowed dates in full. As a solution, both the lenders and borrowers came to an agreement whereby the borrowers pay half of the borrowed dates and pay the other half in the next harvesting season plus a similar amount in extra (an additional 100 percent). The Prophet came to know about this practice and ordered both companions to stop it. Then came the verses. They obeyed the prohibition.

Taking the above as the basis of his argument, Dr Muhammad Anwar (an Economics Professor at the International Islamic University) in his article entitled Islamicity of Banking and Modes of Islamic Banking (Publisher: International Islamic University) pointed out that many doubts still linger pertaining to the practice of Islamic banking, thus raising the question: "Is Islamic banking practice really in line with the rules as ordained in the Quran? His research and analysis reveals that " functions of both central banks and commercial banking systems are contrary to the teachings of the Quran." {op. cit. p. 1).

Although there were opinions that "conventional interest rate is nothing but mudharabah " (op. cit. p. 2-3) and that the Grand Mufti of the Al-Azhar University was reported to have declared that "the interest-based banking is akin to mudharabah and murabahah " (op. cit. p. 3), the majority of Islamic scholars agreed that conventional interest rates are indeed usury and hence, unlawful.

According to Muhammad Anwar, the use of Islamic terminologies by Islamic banks "is merely a change in form rather than substance of banking business." (op. cit. p. 3). The practice of Islamic banking, except for the usury part, does not differ significantly from conventional banking practice.