Principles of Islamic Banking and Finance Key Concepts Applications AIMS Education

principles of Islamic banking and finance Islam has set values and goals that meet all the economic and social requirements of human life is LOM is religion that not only focuses on the success of the afterlife but also organized as the life of person perfectly the Islamic laws are known as Sharia that means clear path and the present banking system is against the principles of Islamic banking here we discussed these seven major principles of Islamic banking and finance number one profit and loss sharing it is one of the best principles of Islamic finance where the partners will share their profit and loss according to the part they played in the business there will be no guarantee on the rate of the returns and the Muslims will play the part of partner and not creditor number two shared risk in the economic transactions risk sharing is promoted by the Islamic banking when two or more parties will share the risk the burden of the risk will be divided and reduced in the parties so it will improve the economic activity of the state number three prohibition of RIBA interest or RIBA is prohibited and some of its reasons are as follows the wealth will get the return without any risk or effort regardless of the outcome of economic activity the person who gets the loan has to return the money and RIBA to the lender and taking advantages of the interviews that others are facing is unjust number four prohibition of gara Muslims are not allowed to participate in the ambiguous and uncertain transactions according to Islamic rules both party should have proper control over the business as well as the complete information should be shared with both parties so that the profit and loss will be equally shared number five prohibition of gambling in Islam the acquisition of wealth through evil means or participation in gambling is prohibited it will protect the Muslims from the conventional insurance products because that is type of gambling on the other hand Islamic banking works for the system that involves mutual responsibility and shared risks number six no investment in prohibited industries the industries that are harmful to society or have threat to the social responsibilities are prohibited in Islam they include the following pornography prostitution alcohol pork and drugs investment in such industries is also not allowed neither one can participate in the mutual funds that will help the industry to flourish and number seven is curve form of tax has included in the rules of Islam that is known as the CAF which allows the balanced distribution of wealth according to the Islamic principles an individual who owns specific amount of wealth or savings must pay 2.5 percent of his or her wealth every year Islamic promotes this social responsibility so this handsome amounts may be distributed among the needy we may conclude that the principles of Islamic finance guide us to invest in an industry that will help us to achieve the financial and social objectives that have been determined by Islam these principles have been designed to make an economy successful so it is way of saving our money from being invested in the wrong path you