Explanation:

Both statements are correct.

• Islamic banking refers to banking activity that conforms to laws and values laid down by Islamic law or Sharia.

• Islamic banks are not money lenders. They operate as trading and investment houses.

• Basis of Islamic finance is the rejection of usury (the levying of unreasonable high interest rates) while lending money, along with the requisite that there must be no engagement with immoral businesses.

• Interest free banking is a narrow concept within this system, which denotes a number of banking operations which avoid interest.

• Riba is the Islamic term for interest charges on loans, and it covers all interest - not just excessive interest.

• Under Islamic law, a Muslim is prohibited from paying and accepting interest on a predetermined rate.

• As per Islamic banking, money can only be parked in a bank without interest and cannot be used for speculative trading, gambling, or trading in prohibited commodities such as alcohol or pork.

• Instruments - Various instruments are available for those who want to take credit from a Sharia compliant bank.

• In an Ijarah contract, a bank purchases the asset on behalf of the client and allows its usage for a fixed rental rate.

• After a mutually agreed time, the ownership of the asset is transferred to the client.

• Another instrument is Murabaha, which means a sale on mutually agreed profits.

• In this financing technique, an asset is purchased by the bank at a market price and sold to the customer at a mutually-decided marked-up cost. The client is allowed to repay in instalments.

• Musharaka refers to a joint investment by the bank and the client. Under the agreement, an Islamic bank provides funds, which are mixed with the funds of the business enterprise and others.

• The bank and the client both contribute to the funding of an investment of purchase, and agree to share the profit or loss in agreed-upon proportions.

Hence option 4th is correct.