Fawzi Ahmed was more concerned with morality than profit when he opened an account in 1983 at the fledgling Bank Islam, a bank operating on Islamic principles.

Most important was Islam's ban on interest payments as usury. Fawzi and other Muslim depositors would not receive interest on money in their accounts--instead, they would share in the bank's profits on investments in businesses.

But ask Fawzi, a municipal surveyor, why he still uses Bank Islam, and he doesn't even mention religion.

"Convenience. It's near my office in City Hall," Fawzi said one morning outside one of the bank's branch offices in Kuala Lumpur, Malaysia's bustling capital. "They have checking, everything I need."

Begun in Egypt three decades ago to give Muslims a safe place to keep their money, banks operating on Islamic principles have grown into a competitive, multibillion-dollar industry that is expanding rapidly in many parts of the world.

Islamic banks are common in the Middle East and have sprung up as far away as London and the Philippines. The theocratic leaders of Iran and Sudan require their bankers to do all of their business by Islamic guidelines.

Since Bank Islam became Malaysia's first to operate on Islamic principles, the industry has taken off as a consumer business in the Southeast Asian nation. Malaysia is encouraging its Islamic bankers to try to become global leaders by offering home mortgages and a growing array of sophisticated financial services.

The bedrock of Islamic banking is the ban on interest payments. These are regarded by the Koran, Islam's holy book, as exploitation because depositors and lenders make money without providing labor or sharing risks.

Islamic banks pool deposits to invest in construction, commodities trading and other businesses that do not profit from interest payments.

Commercial borrowers pay the bank and its depositors a share of their profits instead of interest. That involves significant risk for the bank, because it does not know in advance what the profit, if any, will be.

Led by giants like Saudi Arabia's al-Rajhi Banking and Investment Corp., which has $8 billion in assets, the world's Islamic bankers are believed to preside over total deposits of as much as $70 billion.

That is still less than the resources of a single big Western or Japanese bank. But rapid growth in the industry has prompted Citibank and other major international banks to open Islamic subsidiaries.

In Malaysia, Bank Islam's deposits have grown to some 3 billion ringgit, or about $1.2 billion, and other banks have followed its lead by opening separate teller windows to handle Islamic transactions.

One institution, Arab-Malaysian Bank, has issued Southeast Asia's first Islamic credit card--an interest-free Visa card . Users can charge an amount equal to their deposits, and the fee is a percentage of their annual spending.

Eager to emphasize their market appeal, Islamic bankers point out that they also attract thousands of mortgage borrowers from the Chinese and Indian minorities in Malaysia's population of 20 million people.

The cost of an Islamic mortgage is about the same as Western financing. But borrowers are lured by its simple terms--a flat monthly fee that eliminates the uncertainty of variable interest rates often used by traditional banks.

To attract foreign investors, Prime Minister Mahathir Mohamad's government is developing an " Islamic capital market" using specially designed interest-free bonds and other securities.

Malaysian ambitions to be a Muslim version of Wall Street are part of Mahathir's effort to promote the country as a role model for Islamic societies in embracing modern technology and finance.

Eight Malaysian Islamic funds hold shares worth $780 million in 330 carefully screened companies. Stocks cannot be linked to liquor, gambling or other enterprises regarded as sinful by Islamic teaching.

"We feel that we have a good chance of attracting Muslim money from the region and farther away, the Middle East or wherever," said Nik Ramlah, an official of Malaysia's Securities Commission.

The real prize would be a share of the hundreds of millions of dollars held idle by Muslims in the Middle East for lack of suitable investments.

"The cash is there. The question is whether Malaysia uses enough (religious) rigor," said James Drummond of the Middle Eastern Economic Survey, a business magazine based in Nicosia, Cyprus.

Conservative Muslims criticize Malaysia for allowing banks to conduct both Islamic -oriented and interest-paying services under the same roof. They also criticize the government for letting Islamic stockbrokers handle companies that make some of their profit from interest payments.

Skeptics say Malaysia's goal of becoming a full-fledged Muslim financial system is impossible, because bank accounts and other interest-earning activities are an inescapable fact of most corporate life.

"That concern is true," Nik said. "But it just underlines the need to introduce the necessary Islamic financial products to meet the needs of modern investors."

GUIDELINES OF ISLAMIC BANKING OFFER DEGREE OF CERTAINTY, RISK

Some features of Islamic banking principles:

Interest on deposits: Islamic banks pay no interest on deposits. Unlike fixed return promised by most Western banks, Islamic banks operate on principle of shared risk. Depositors can choose an account that guarantees their money but pays no dividend, or one that acts like an investment fund. Depositors in investment accounts share in the bank's profits, but risk losing money if its investments perform poorly.

Interest on loans: Islamic banks charge no interest on loans. Instead of lending money to commercial borrowers at fixed rate of return, Islamic bankers become partners, sharing in venture's profits and losses. Some Islamic banks also make mortgage loans, charging flat fees payable in monthly installments, with costs similar to traditional mortgages. But loans have no compound interest or late-payment charges, and borrowers are spared uncertainty of variable interest rates common in Western nations.

Loan purposes: Although traditional banks judge borrowers on ability to repay loans, Islamic bankers are expected to also consider their consequences. Islamic banks will not lend money to businesses engaged in activities that are considered immoral, such as casinos and distilleries. They also are expected to avoid exploitative practices such as long working hours for children.