Islamic Banking & Finance

Islamic banking aims to conduct financial activities consistent with Shariah, avoiding riba (interest), gharar (uncertainty), and haram investments.

Riba refers to any guaranteed increase in a loan or debt without risk-sharing, strictly prohibited in Islam.

Islamic banking prohibits interest and is based on profit-and-loss sharing principles.

Mudarabah is a partnership where one party provides capital and the other managerial expertise, sharing profits per agreement.

Musharakah is a joint venture where partners contribute capital and share profit or loss according to a pre-agreed ratio.

Murabahah involves selling goods at a known profit margin, ensuring transparency and Shariah compliance.

Ijara refers to leasing where ownership remains with the lessor while the lessee pays rent for asset use.

Gharar, or excessive uncertainty, is prohibited because it leads to injustice or exploitation.

Takaful is a mutual protection system based on solidarity, where participants contribute to a shared fund.

Sukuk literally means certificates and represent ownership in tangible assets or services, unlike interest-bearing bonds.

Sukuk represent ownership in real assets or projects rather than a debt obligation.

Gharar refers to transactions with major uncertainty, such as selling an unknown item or outcome.

Halal investments comply with Islamic ethical and legal guidelines, avoiding haram activities.

Qard Hasan is a loan given purely for welfare purposes without expecting any return.

Debt trading at a discount constitutes riba, as it involves unequal exchange of money for money.

The Shariah Board oversees all financial products and ensures conformity with Islamic principles.

Ijara wa Iqtina combines leasing with eventual ownership transfer to the lessee.

Allah says in 2:275, 'Allah has permitted trade and forbidden Riba.'

The Rabb al-Mal bears financial loss while the Mudarib loses effort and time.

Musharakah is a joint ownership partnership sharing profit and loss.