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Islamic Finance For Dummies

Islamic banking complies with sharia (Islamic law) and aims to provide financial services free from injustice. It emerged to replace conventional interest-based banking with profit-and-loss sharing models. Islamic economists believed interest promotes economic inequality. With rising financial assets from oil wealth, Muslims sought to align their lives with Islamic ethics. Key differences are that Islamic banks earn money through profit/loss sharing and trading rather than interest, while providing similar services. Some disadvantages are greater risks for depositors and limited funding options compared to conventional banks. Common Islamic bank accounts include savings, investment, and zakat accounts.

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262 views2 pages

Islamic Finance For Dummies

Islamic banking complies with sharia (Islamic law) and aims to provide financial services free from injustice. It emerged to replace conventional interest-based banking with profit-and-loss sharing models. Islamic economists believed interest promotes economic inequality. With rising financial assets from oil wealth, Muslims sought to align their lives with Islamic ethics. Key differences are that Islamic banks earn money through profit/loss sharing and trading rather than interest, while providing similar services. Some disadvantages are greater risks for depositors and limited funding options compared to conventional banks. Common Islamic bank accounts include savings, investment, and zakat accounts.

Uploaded by

Shah Khan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Islamic banking or Islamic finance or shariah law-compliant finance is banking or funding activity that

complies with sharia (Islamic law) and its employment through the event of Islamic economics. Islamic
banking turned into released with the hopes that it might provide every other enterprise that can be
free of injustices inherent in hobby based machine. on situation that financial institution hobby turned
into deemed impermissible with the aid of using majority of the Muslim jurists, the selection turned into
deliberate inside the form of income and loss Sharing enterprise. Islamic economists desired to
interchange constant-go back debt finance version of banking thereupon of fairness finance on the idea
of Profit-and-Loss Sharing. Besides this, vast majority of monotheism economists had the examine that
constant price machine promotes economic advantage inequalities. They encouraged that monotheism
banking, being ethically accountable, could sell quite a few fairness. The revival of Islamic banking
coincided with the world-huge birthday party of the advent of the 15th Century of Moslem calendar
(Hijra) in 1976. At equal time financial assets of Muslims appreciably the ones of the oil production
countries, obtained a boost way to clarification of the oil prices, that had til now been underneath the
control of overseas oil companies. These activities diode Muslims' to try and version their lives according
with the ethics and ideas of Islam.

Islamic Finance for Dummies

One key difference is that regular banks earn their coins with the aid of using charging hobby and prices
for offerings, while monotheism banks earn their coins with the aid of using income and loss sharing,
trading, leasing, charging expenses for offerings rendered, and mistreatment opportunity shariah
regulation contracts of exchange.

Disadvantage of Islamic banking

Islamic finance contrast to standard banks provides a few disadvantages: `More dangers for depositors,
better prices, and principal-agent issues, insufficient funding, restrained provide, coverage with pitfalls,
much less scope for diversification and hedging'.

The following kinds of money accounts have been accepted:

Savings money account

Investment money account

Zakat money account

No hobby turned into paid on financial savings money owed, but withdrawals may be created on
demand. Small, short-term, hobby-loose loans for effective capabilities may be created. Funds in funding
money owed have been problem to restrained withdrawals and endowed on the idea of income-
sharing. The pillar of Islam account attracted the legitimate amount of pillar of Islam.

Islamic Banking Principles


The Shari’ah prohibits the price of fees for the apartment of coins (riba, that inside the definition of
monotheism college students covers any extra in financial dealings, usury or hobby) for particular terms,
similarly as funding in corporations that provide products or offerings notion of opposite to its ideas
(Haram, forbidden). while those ideas have been used due to the fact the idea for a flourishing financial
system in in advance times, it is totally inside the past due 20th century that form of monotheism banks
have been long-established to apply those ideas to personal or semi-personal commercial enterprise
institutions within the Muslim community. The bulk of these ideas rectangular degree supported clean
morality and standard sense, that type the bases of the various religions, in addition to Islam. Usury
turned into prohibited in every the preceding and New Testaments of the Bible, while the bard and
plenty of opportunity writers, appreciably the ones writing inside the 19th century, have attacked the
barbarity of the follow. ample of the morality championed with the aid of using Victorian writers like
Dickens - beginning from the equitable distribution of wealth via to man's primary proper to figure - is
virtually present in elegant monotheism society.

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