Islamic Banking

Islamic Banking (Non-Interest Banking), also referred to as Islamic finance or shariah-compliant finance, refers to financial activities that adhere to shariah (Islamic law). This is a profitable growing global phenomenon practised in nearly 70 countries across the world including the United Kingdom, Canada, the United States of America, the United Arab Emirate, Malaysia, China, Singapore, South Africa, Kenya etc. Global Banks like HSBC, Citibank, Barclays Bank etc. also have windows for it. It is an alternative financial service offering which is open to all irrespective of race or religion.

It is based on the ethical principles of fairness, transparency and integrity. Non-Interest Banking offers almost all the services of conventional banks. The difference is that non-interest Islamic Banks do not give or receive interest, nor finance anything that is harmful to society like alcohol, tobacco, gambling etc. They also seek to avoid gharar – excessive speculation, uncertainty in a contract and lack of transparency.

The principles of Islamic banking are derived from the Qur'an–the central religious text of Islam. In Islamic banking, all transactions must be compliant with shariah, the legal code of Islam (based on the teachings of the Qur'an). The rules that govern commercial transactions in Islamic banking are referred to as fiqh al-muamalat.

This is a very common strategy in the trading world, but it’s mostly been a tool of large financial institutions. With the democratization of financial markets thanks to cryptocurrencies, there might be an opportunity for cryptocurrency traders to take advantage of it, too.

The foundation of the Islamic Banking model is based on a profit-sharing principle, whereby the risk is shared by the bank and the customer. This system of financial intermediation contributes to a more equitable distribution of income and wealth.

Islamic Banking is about conducting business in a fair and transparent manner. Guiding you through to ensure full understanding of risks and costs associated with the products and services is the utmost prerogative.

Based on Shari'a principles, Islamic Banking is not restricted to Muslims only and is available to non-Muslims as well. Moreover, experiences of recent years have already indicated that the interest of people in Islamic Banking goes beyond only Islamic investors. The UK is said to be the hub of Islamic Banking in the world, yet only 5% of its population are Muslims.

Islamic banking is gaining popularity in emerging markets after helping some financial institutions avoid the worst of the economic meltdown. Islamic Banks have been less affected than many Conventional Banks in the current global recession. This is mainly because unlike Conventional Banks, the Islamic Banks have not been exposed to losses from investment in toxic assets nor have they been dependent on exotic derivative instruments since these practices are not in accordance with the principles set out in the Sharia Law.