The principles of Islamic finance

Islamic finance is a subtle mix of economy, ethics and Islamic law (Sharia) resulting in financial transactions based on fairness, profit and loss sharing and real transactions.

• Avoid riba
  

Riba which has come to be interpreted as interest, is forbidden in Islamic transactions. This is a fundamental principle for Islamic finance and banking. Therefore a conventional loan, for instance, is impermissible as it includes interest.

• Avoid gharar and maysir
  

Any agreement that has a significant part of gharar (excessive uncertainty) or maysir (speculation) will be considered as invalid from a Sharia'a perspective. Preventable ambiguities and faults in the terms of the contract are also banned.

• Avoid haram
  

According to Sharia'a, trade is only permitted in the goods and commodities that are declared halal (lawful). Consequently, any stock of a company that derives substantial income from haram (unlawful) activities (e.g. alcohol, gambling, non-halal meat, conventional banking) should not form a part of an Islamic investor’s portfolio.

Islamic Finance

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Sukuk

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