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Islamic Finance is of course from Muslim countries, although some traditional and western banks now offer some Islamic products. In these cases, the term “Islamic Window” is used, where all activity related to Islamic finance in a conventional bank is confined to avoid any risk of making the transaction unclear in case of a mixture of activities.
Islamic financing respects a number of principles dictated by the Quran, the Sunna (prophetic tradition) or Fiqh (Islamic jurisprudence). The main prohibitions or restrictions of the Shari a include for Islamic financing system are:-
When it comes to know the basic Islamic financing principles, then remember that it is strictly forbidden for a lender to realize a financial profit resulting from late payment penalties paid by a debtor in default of payment. On the other hand, it is permissible (and accepted by a number of scholars) for a lender to impose the payment of penalties for delay, since this is an incentive for prompt payment.
There is no single definition of Islamic Finance but it is widely used today to refer to financial and commercial activities that respect the principles of Islamic law and jurisprudence, more commonly referred to as Shari a “. Respect for such principles allows investing and making profits in accordance with the rules of Muslim law.
The fundamental principle of Islamic banking is based on the Bank’s direct involvement in transactions financed by it. The remuneration it receives is justified either by its status as co-owner, to the results of the project financed (losses or profits) in the case of a Moudharaba or a Musharaka, or by the provision of marketing or leasing of property previously Acquired by it in the case of a Moudharaba, an Idjar (Leasing / Leasing) or a Salam, or, finally, by the manufacture / construction of movable or immovable property by it or by third parties, In the case of an Istsina’a.
