In some cases, it is arguably the case that some Islamic banks clearly do this. For instance, with so called Islamic mortgages these banks do not fulfill the conditions of an instant contract and thus have effectively turned changed the phrase interest to rent.
One of the issues with interest is that the money is unearned/created out of nothing, so if an Islamic bank is not its investors returns based on profits from investment then it would be classified as interest I think
This is indeed a scary topic. I recall having dinner with a well known Islamic finance expert where he told me he had come across so many cases where there was a scholar backing a project or bank offering that was very clearly Haram but the person was turning a blind eye.
So the way this Ijara model works is as follows. A person places a deposit for a property. Let’s say 10% of the property’s value. The Islamic bank now owns 90%, each month the person buys a percentage of equity and pays rent on the percentage they do not own.
Now two issues arise here no.1 does the bank accept liability for damages? No.2 does the amount of rent paid decrease each month as equity is bought?
If the answer is no to any of the above issues then the contract is haram.