The Performance of Islamic Banks Under an Interest Rate System in Indonesia How do Islamic Banks Operate with Interest-Based Instruments?

An Islamic bank is a bank that utilizes Islamic principles in its operation. It is also defined as the financial institution relying on the principle of Profit and Loss Sharing(PLS) with the entrepreneurial partners in its relevant banking activities. One of the important things distinguishing Islamic banks from conventional ones is that the Islamic banks are prohibited to utilize the variable of interest rate in their operations, such as financing, deposit and the likes, since it is assumed that the variable is regarded as riba and the riba itself is clearly prohibited either by the Holy Quran or the Hadith.