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Islamic Finance: a Summary

In: Business and Management

Submitted By saifbh
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Islamic finance
A brief summary

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Islamic Finance

One of the most innovative trends in our Islamic world is our Islamic banking system. This industry is growing in manner that lead most of the large conventional banks like J.P.Morgan and MorganStanly to open divisions concerned with Islamic finance products.
According to Middle East newspaper, Middle-East Newspaper (30/05/2008) there are around 300 Islamic banks around the world ,130 of them are in GCC countries. Global Trader (19/07/2011) This industry has grown from $ 150 million in 1990, to around $ 1 trillion. Moreover, Islamic banking sectors currently holding more than $ 1.3 trillion in Assets. ABNA (31/03/2012) Most of those assets are located in Malaysia, Saudi Arabia, Iran and Sudan. banking operations are based on three fundamental Principles: * Prohibition of Riba * Prohibition of Gharar * Principles of Islamic Share'a

This chapter would insight more on these three philosophy and going to explain each them in details.

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Riba

Riba can be defined as “any Contractual increase above what is required”. It can be divided into two main points: 1. Ribba Al Nassiah: Riba that is related to Time ( e.g. If you did not pay on time there will be an penalty to pay with the debt) 2. Ribba Al Fadhel: which is related to unequally exchange of commodities that was mention by the prophet peace be upon him like Gold ( e.g. exchanging 1 kilo 22k gold for 18k gold ). These commodities are: Riba: gold, silver, wheat, barley, dates, and salt.
In order to overcame the riba , you have to sell and receive money on spot than buy what you desire. Of course, as for debt, you cannot receive more than what is obligated to you.

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Gharar...

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