As per my previous question on "The difference between Islamic Banks and Western Banks", it was answered that Islamic Banks do not charge interest but instead agree on a percentage of profits the borrower makes with the borrowed funds. Also if the borrower makes a loss with the borrowed funds, then the bank will absorb the full loss.
My question is how do Islamic banks deal with personal loans (for a car, a boat or a holiday)? Do they lend for these purposes, or as there will be no profits made by the borrower will they avoid this type of lending?
The only way I can see personal lending being viable for Islamic Banks is for them to agree with the borrower on a percentage of the amount borrowed to be paid to the bank over and above the original amount borrowed. Is this how it would work?