Islamic Finance Within Compliance Of Sharia Law

Islam is more than a religion, it’s a culture, and as such has an effect on political, social, and economic aspects of life—this is especially true outside of the Western world. Followers of Islam believe in full submission to God and this submission is practiced in the secular realm (Taha, 114). Of the five pillars of Islam, one (the zakat) has a direct affect on economic policy and ethics. The culture of Islam has shaped economic and business guidelines In the Islamic World and continues to do so. Cultural ideals attributed to the Qur’an or the Prophet Muhammad, have been a vital source for economic and business practices that have helped to shape the history of many Islamic nations, and are guiding the creation of policies

A rule making body issues authorative shari’a auditing standards for all Islamic banks and other Islamic businesses and it will be the most effective way to eliminate problems within the Islamic economy. The most effort to develop a body of consistent standards for shari’a audits has been undertaken by

The Quran tenets encompass various life aspects that include God’s teachings, the way of harmonious living in the community, moral virtues, the regulations on financial matters, and specific obligations among Muslims males and females. In general, the sharia law is an extended platform that provides guidance on family affairs, criminal judgment, political perception, and economic factors. The law thrives on the precepts of religious attributions to God. Since the emergence of sharia law, various Islamic nations have endorsed most or parts of the

No concept or application of interest rates, because interest or riba (in Arabic / Islam) is against the Shariah law (Sapp, 2010, p. 3)

Becoming an expert in Islamic economics and finance field is one of my long-term goals in life. I started to organize and made a plan towards achieving that dream since senior high school. The concern towards Islamic economics and finance concept, and its application for society and the country began when I was reading a book entitled Islamic banking-theory and practice. After finishing reading the book, my interest in Islamic economic and finance topics rose and strengthen my own determination to become the expert of Islamic economics and finance. The main principle of Islamic economics and finance which offers the just and ethics in economic activity, poverty alleviation through income distribution mechanism, and prevention of economic and

Yet, from an Islamic perspective, the answer is no. While the American public seems enamored with more and more debt, Islam has distinct regulations regarding the acquisition of personal debt. The reason is clear: In Islam, economics and religion are inextricably linked—a concept completely foreign to all but the most fundamentalist Americans.

In this case study on investment-linked takaful, there are some shariah issues. The following are some but not limited Shariah issues at the conception of the contract, the fund management and at the level of distribution of profit.

Islamic banking is a controlled institution based on the principles of sharia Islamic rules on transactions made. This means that the Islamic banking system does not accept or allow payment of benefits based

Revenue focus. Any lending model can only succeed with the injection of adequate capital. The focusing of stagnant funds on revenue effectively removes funds that could be used for lending. The challenge will be to have the lender forego a profit yielding investment. Islamic scholars have identified this predicament as a negative attribute associated with interest; it prevents the creation of interest-free loans as the lender expects to realize a gain (Al-Fawzan, 2005). The

The pairing of Islamic Finance and crowdfunding could quite possibly evolve the current American Islamic mortgage product from that whose emphasis is almost solely focused on interest aversion into a product that embraces Islamic fundamentals. Such an Islamic finance vehicle, consistent with the sharing economy methodology, would conform with ALL

The failures and bailed out of large banking and financial institutions during economic turmoil of 2008-2009, is an emblematic of the excessive and imprudent lending and securitisation activities. Most economist, politicians and commentators referred the crisis being a reminiscence of capitalism and its inherent greed. The conventional economics, which ignored “centrality of human beings and their well-being” (Asutay, 2007), has led to the emerging calls for economics well-being thus contributed to the rapid development in Islamic finance globally. Reilly (1990) commented that this “phenomenon is the search for a new and just economic and political structure to replace the unacceptable and/or unworkable socialistic or capitalistic systems” or in other words, a moral economy. The discussion hereafter is to look at how moral economy is defined, the articulations and implications and whether Islamic economics as being grounded on the axioms and foundational principles of Islam, can be considered as moral economy from both aspirational expectations and operational aspect of it, thus served as a distinctive moral economy system.

The prosperity and peace of a society much or less depends on its economy. While for the smooth running of both, there are several instructions in Islamic Shariah and allows what is right and forbids what is wrong. When we talk about financial issues, Islamic Shariah strictly condemns Riba. The question may arise why Islam prohibits Riba? While it was already in practice before the advent of Islam and still it is a part of different economic systems throughout the world. It is simply because Islam gives respect to human beings and condemns all the attempts that are harmful and disgraceful for humanity. Therefore, Riba is not only forbidden in Islam but economic experts are also in search of its substitute. Since borrowing on interest rate creates several issues including: less efficient allocation of resources, indebtedness, unemployment and economic instability. While in society it causes injustices, inequity, poverty and imbalance etc. In this paper we are discussing how Riba causes imbalance in the society and instead Riba what Islam demands from its followers.

What is Islamic Finance? Islamic finance is any finance that is compliant with the principles of Islamic law Shari’ahs. In terms of finance, Shari’ah explains in detail the ethical concepts of money and capital, the relationship between risk and profit and the social responsibilities of financial institutions. A distinctive feature of Islamic finance is that it does not allow the creation of debt through the direct lending and borrowing of money or other financial assets. The debts

Islam means surrender before the GOD, because they have faith only in Allah and nothing else and Islam is the complete code of life of the human beings on the earth, it does not only cover the social life of the human beings but it covers also the economy. GOD means generator, operator and destroyer, Quran came through the Revelations made by God to the prophet Mohammed (P.B.U.H) and was compiled in a book form in the life of the third caliph and provides the direction to the human beings for the right actions on the earth. The business is also the part of the right actions for all the Human beings and for the first time on the earth the Mudarbah system meaning Profit and loss Sharing business was performed by the Prophet Mohammad (P.B.U.H) for his Wife khadija (Rajiallah anhu); before the commencement of the Islam the Mudarbah types of business was not performed by the world business groups and the business transactions were performed by the small and big Merchants on that time only for the sake of benefits and with the motive of acquiring unreasonable interest. In the holy Quran, the four chapters are governed for the business transactions relating against the interest such as Sura Baqra, Sura Nisa,Sura Al Rum and lastly Sura Al Imran and emphasize on the principle of the Free interest economy. In the Islam religion the interest word is used in the Arabic term” Riba” or usury which means excess,exorbitant,pre-determined and unreasonable, because it increases the

Omani financial regulatory bodies have finalised the amended regulatory framework for Islamic banking in the Sultanate. Alongside the GCC-based Islamic finance favourites, the reformed Islamic financial jurisdictions of MENA are entering into the limelight. Other regional developments in non-GCC countries in MENA include the Iraqi government, which has approved the establishment of the country’s first state-owned Islamic bank, the Two Rivers Islamic Bank, with an initial capital of USD21.5 million. Iraq and Libya are in the midst of designing Islamic banking legislation. Tunisia’s Islamic finance industry is expected to grow further with the efforts undertaken by that country’s government. Meanwhile, the Government of Yemen is structuring a Sukūk programme for 2014.