The concept of Islamic banking has attracted considerable attention since the 1970s from both non-Muslims and Muslims. Although less than 1 per cent of all world banking transactions are conducted in accordance with the Islamic shariah law, the principle of interest-free financing has caught the imagination of many. Most bankers have heard of the Islamic prohibition of riba or interest. Knowledge of the alternatives, however, is much less widespread. The principal alternatives are mudrabal, in which a bank invests directly in an existing business, and musharakah, in which the bank and the business found a new partnership. Both have been used as financing instruments since the time of the Prophet Mohammed, and are well-suited for medium and long –term financing. Islamic banks operate successfully using these instruments both in countries where the entire banking system has been 'Islamized'(Iran and Pakistan) and where Islamic banks compete with conventional banks, as is the case in most Arab states, Turkey, Malaysia and Indonesia.