2. What is Islamic Finance?
• Islamic finance is a type of financing activity that must comply with Sharia
(Islamic Law). The concept can also refer to the investments that are
permissible under Sharia.
• What are the rules of Islamic Finance?
• Shariah strictly prohibits any form of speculation or gambling, which is
referred to as maisir. Shariah also prohibits taking interest on loans. In
addition, any investments involving items or substances that are prohibited in
the Quran—including alcohol, gambling, and pork—are also prohibited.
3. Investing in businesses involved in restricted
activities
•Investing in businesses involved in activities
such as manufacture or marketing of alcohol,
gambling or speculative activities,
conventional interest-based financial services,
pork and pork products is restricted
•
4. Types of Financing Arrangements
• Since Islamic finance is based on several restrictions and principles that do
not exist in conventional banking, special types of financing arrangements
were developed to comply with the following principles
• Profit-and-loss sharing partnership (mudarabah)
• Profit-and-loss sharing joint venture (musharakah)
• Leasing (Ijarah)
