What is Islamic banking? What are the ethical, legal, and religious nuances attached to it?


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Islamic banking refers to a financial management system that is based on the principles of Islamic laws and guidelines and it is practically applied through the development of Islamic economics. The principles of Islam emphasises on moral and ethical values in all dealing happening worldwide. Because of its ethical and moral values, many people from other faiths use islamic banking. Shariah prohibits the payment or acceptance of interest, also known as riba.

Investments involving alcohol, gambling, pork, and other forbidden items are prohibited. Financial transactions within Islamic financing are a culturally distinct form of ethical investing. One of the companies the follow ethical investment is Ethis, the name of the company fuses the word Ethical and Islamic in line with the aim to be a premiere marketplace where both ethical and Islamic investors can come to find investment opportunities in line with their values to invest in.

The principle source of Shariah is the Holy Quran followed by the recorded saying and actions of Prophet Muhammad (peace be upon him), Hadith. When answers for issues cannot be found in these two sources, rulings are made based on the consensus of a learned and scholarly community, independent reasoning of an Islamic scholar, and the custom of that specific location, as long as such decisions do not deviate from the primary teachings/ lessons in the Quran.

Source: islamic-banking.com