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Islam is more than a religion; it is a way of life for many Islamic nations. And that includes how they exchange money and bank in a globalised economy. Muslims, like anyone, still need to buy cars, get a loan for the down payment of a home, need to have financial assistance when starting up a new business or venture and even require a place to park their funds. However, the first priority of a practising Muslim is to live all aspects of their life as it is laid down in the Quran, the holy book which is considered the word of the Prophet Mohammad. Many concepts within the Quran lie at odds with the modern westernised methods of banking. These collective codes are known as Sharia. So the solution is a fairly recent one in the history of world banking. It is defined by the term Islamic banking, offers a new paradigm to how the world views banking and bankers and has a satellite media system of Islamic finance news. The main difference between regular banking and Islamic banking and finance is the prohibition of interest or usury. Making money from money without doing any actual work for it is prohibited according to the Sharia. Money is considered a means to an end and for exchange of value. The emphasis is given to the work put in and the risk taken. Also hoarding money and not using it to benefit society is unacceptable according to Islam. So it is the duty of a bank to ensure that its money doesn’t lie idle and is given out for the purpose of actual personal or business growth. Interest, which is known as riba, is prohibited. When the focus turns to the rate of interest and the profit on the returns as opposed to the work that the money is used for, then it is considered an illness in society. So the bankers have to get around this by forming a unique relationship with the client. As a financier, the bank too would take on the risk and in the case of a loss, would proportionately bear the loss. Besides the notion of justice and fairness in society, the Sharia also holds Islamic finance to moral and ethical codes. According to Sharia, alcohol, gambling, pornography and tobacco use are a few things that are banned in an Islamic society, since they are viewed as a means to disruptive and destructive anti-social behaviour. Accordingly, banks do not offer loans for an entity that would like to start up the production of alcoholic beverages. Or even finance the construction of a unit dedicated to creating gambling chips.
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Islamic Banking and Finance, Islamic Finance News, Islamic Finance,
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