This book is result of five years teaching of Islamic finance course to MBA Finance students. This book is written with a clear focus on learning of Islamic banking & finance by accounting, banking, business and finance students/professionals. Resources available, so for, on the subject have focused on legal side and very negligible work is available on financial front for a common user. This book is written in financial perspective and author has focused upon financial impacts, generated by application of Islamic financial laws. However a summary of Islamic commercial laws of each chapter has been provided. Author has adopted balance sheet method to inculcate the knowledge; hence, understanding of elementary balance sheet is recommended to get maximum out of this book. This book is divided into five parts. Part-1 presents an update on Islamic finance. Part two is about asset backed financing provided by IFIs. It includes trading (selling) modes of financing including Murabaha, Salam and Istisna'a; it also includes Ijarah financing. At the start of part two, summary of Shari'a rulings about sales is reported. Part three of the book deals with profit and loss sharing modes of financing including Musharaka, diminishing Musharaka and Mudaraba. A special section is devoted to discuss the causes of lesser application of Musharaka in operations of IFIs, in addition to Shari'a rulings and financial impact. Chapter seven is about Diminishing Musharaka; a form of gradually declining partnership between an IFI and clients; generally used to finance real estates. Under diminishing Musharaka, I have discussed the basic Shari'a rulings, Islamic house financing, comparative study of conventional and Islamic mortgages and installment calculation under different assumptions for house financing. Chapter eight is about Mudaraba. Under this scheme of financing IFIs provide capital to financially weak but skilful people to do the business and share outcome with IFIs. Part four is about deposits management. Part five of the book presents special topics in Islamic Finance. In this part areas of liquidity management and Islamic insurance are discussed. Under Islamic capital market two dedicated chapters have been included; each for equities and Sukuk. Chapter 12 is dedicated for Islamic insurance. Last chapter has focused on challenges to Islamic finance industry. Third edition is definitely outcome of very encouraging response by academic community to earlier editions. In this edition due attention has been given to present material in reader friendly mode in addition to thorough review of content, exercises and figures. In this edition Islamic capital market is re-written by including separate chapters on equities and Sukuk. Also a special chapter is devoted to Islamic insurance. Updated figures on global volume of assets, regional shares, equity funds and Sukuk are also part of this edition. Also more examples included in the text to make the concept clear. In appendix guidance for establishment of Islamic bank and appointment of Shari'a advisor as provided by local central bank is included. Increased number of true/false, multiple choice questions and mini cases are also forming part of updated edition. This book is useful for MBA/BBA students as a three credit hour course as well as for banking/finance students and practitioners of Islamic banking & finance. It is also useful for accounting & finance professionals, trainers in Islamic banking, regulators, investors, corporate managers and general public, interested in understanding Islamic finance. I hope this book will serve its purpose through imparting knowledge of Islamic banking & finance among accounting, business and finance graduates as well as practitioners of Islamic financial system, investors and general public.