A good understanding of sharia compliant financing makes any financier more knowledgeable. There are significant Muslim populations in every corner of the globe. As a result, financial service providers should bear the unique interests of such clients when developing their financial products. This ensures that such businesses comply with Islamic teachings in their financial dealings.
Islamic teachings do not encourage interest payments on money deposits. Similarly, investing in businesses whose dealings involve the provision or sale of illegal goods and services is equally forbidden. These restrictions may slightly vary depending on the region. Every business should strive to comply with the beliefs of its clients.
It may be difficult to conceive how depositors in a bank for instance are able to gain without earning interest on their deposits. This problem is however solved through a technique called profit and loss sharing. Instead of the bank awarding its clients interest, it instead proportionately shares profits and losses with them.
Islamic teachings do not encourage interest payments on money deposits. Similarly, investing in businesses whose dealings involve the provision or sale of illegal goods and services is equally forbidden. These restrictions may slightly vary depending on the region. Every business should strive to comply with the beliefs of its clients.
It may be difficult to conceive how depositors in a bank for instance are able to gain without earning interest on their deposits. This problem is however solved through a technique called profit and loss sharing. Instead of the bank awarding its clients interest, it instead proportionately shares profits and losses with them.
Over the years, Islamic banks have been developed. Nowadays, some of the major banks in the world have specifically developed facilities that cater for the needs of their Muslim clients. This has been necessitated by the growth of sharia compliant banks which have attracted a number of Muslims.
Conventional banks have targeted this unique market by developing solutions that favor Muslims. In some western countries, laws that better govern the operation of such banks have been developed. This has made more people to believe that sharia compliant financing is workable.
The contribution of sharia compliant financing to global business finance cannot be ignored. This is best explained by the over four hundred billion dollars of sharia compliant assets globally. That notwithstanding, the value of such assets could potentially grow to well over four trillion dollars in coming years.This is a clear manifestation of the growth potential in this area of finance.
The main motive in sharia compliant financing is profit making. However, the steps taken in making profit should conform to the teachings of Islam. This is best illustrated by the case of an Islamic mortgage. In the case of an Islamic mortgage, instead of a bank lending money to the borrower, the bank may itself purchase the house and later on sell it to the borrower at a profit.
The transactions entered into have to be legal. One cannot be allowed borrow money to engage in an activity that is not in line with Islamic teachings. A case in point is borrowing money to purchase alcoholic drinks. This is not permissible.
Islamic banks in most cases have committees that advice them with issues that deal with compliance. Whenever such institutions contravene the teachings of Islam on lending and borrowing, they
Conventional banks have targeted this unique market by developing solutions that favor Muslims. In some western countries, laws that better govern the operation of such banks have been developed. This has made more people to believe that sharia compliant financing is workable.
The contribution of sharia compliant financing to global business finance cannot be ignored. This is best explained by the over four hundred billion dollars of sharia compliant assets globally. That notwithstanding, the value of such assets could potentially grow to well over four trillion dollars in coming years.This is a clear manifestation of the growth potential in this area of finance.
The main motive in sharia compliant financing is profit making. However, the steps taken in making profit should conform to the teachings of Islam. This is best illustrated by the case of an Islamic mortgage. In the case of an Islamic mortgage, instead of a bank lending money to the borrower, the bank may itself purchase the house and later on sell it to the borrower at a profit.
The transactions entered into have to be legal. One cannot be allowed borrow money to engage in an activity that is not in line with Islamic teachings. A case in point is borrowing money to purchase alcoholic drinks. This is not permissible.
Islamic banks in most cases have committees that advice them with issues that deal with compliance. Whenever such institutions contravene the teachings of Islam on lending and borrowing, they
The contribution of sharia compliant financing to global business finance cannot be ignored. This is best explained by the over four hundred billion dollars of sharia compliant assets globally. That notwithstanding, the value of such assets could potentially grow to well over four trillion dollars in coming years.This is a clear manifestation of the growth potential in this area of finance.
The main motive in sharia compliant financing is profit making. However, the steps taken in making profit should conform to the teachings of Islam. This is best illustrated by the case of an Islamic mortgage. In the case of an Islamic mortgage, instead of a bank lending money to the borrower, the bank may itself purchase the house and later on sell it to the borrower at a profit.
The transactions entered into have to be legal. One cannot be allowed borrow money to engage in an activity that is not in line with Islamic teachings. A case in point is borrowing money to purchase alcoholic drinks. This is not permissible.
Islamic banks in most cases have committees that advice them with issues that deal with compliance. Whenever such institutions contravene the teachings of Islam on lending and borrowing, they are given advice on the steps they need to take to ensure conformance.
All this shows that sharia compliant financing is practical. A major complaint of consumers all over the world is ever increasing interest rates. This mode of financing offers a solution to this ever troubling problem. Profit making should not necessarily contribute to the exploitation of consumers. If a balance is struck between the interests of borrowers and lenders everyone stands to gain. This will reduce the amount of discontentment amongst a number of people in the world.
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The main motive in sharia compliant financing is profit making. However, the steps taken in making profit should conform to the teachings of Islam. This is best illustrated by the case of an Islamic mortgage. In the case of an Islamic mortgage, instead of a bank lending money to the borrower, the bank may itself purchase the house and later on sell it to the borrower at a profit.
The transactions entered into have to be legal. One cannot be allowed borrow money to engage in an activity that is not in line with Islamic teachings. A case in point is borrowing money to purchase alcoholic drinks. This is not permissible.
Islamic banks in most cases have committees that advice them with issues that deal with compliance. Whenever such institutions contravene the teachings of Islam on lending and borrowing, they are given advice on the steps they need to take to ensure conformance.
All this shows that sharia compliant financing is practical. A major complaint of consumers all over the world is ever increasing interest rates. This mode of financing offers a solution to this ever troubling problem. Profit making should not necessarily contribute to the exploitation of consumers. If a balance is struck between the interests of borrowers and lenders everyone stands to gain. This will reduce the amount of discontentment amongst a number of people in the world.
About the Author:
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