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Islamic Finance

Since the time of the Prophet Mohammed, Muslims have tried to conduct their financial and commercial affairs in a way that complies with Shari’ah, this is derived from the following sources:-

• The Holy Quran
• Sunna/Hadiths - the examples and saying of the Holy Prophet
• Qiyas - an analytical comparison
• Ijtehad - reasoning and logic applied by scholars
• Ijmaa - a consensus on issues requiring Ijtehad

Islam encourages Muslims to participate in religious activities, and it follows that the Islamic economic system is based on religious goals and values such as:-

• Abolition of interest (riba)
• Economic prosperity within the framework of the moral norms of Islam
• Universal brotherhood and justice
• Desirability of economic enterprise

Over the last fourteen centuries banking and finance have developed dramatically and various scholars have endeavoured to explain how, in practice, finance and business should be undertaken in accordance with the Islamic faith.

The 'modern era' of Islamic banking began in the 1960's with the foundation of the pioneering 'social bank' in Egypt. Since then, over 150 Islamic banks and institutions have been set up in more than 50 countries. Pakistan, Iran and Sudan have actually taken steps to Islamicise their whole banking industry, with an aim to demolish the forbidden riba (interest) entirely.