Core Elements of Islamic Finance - Essay Example

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Core Elements of Islamic Finance

This aims to ensure that the target and purpose of the Islamic finance industry benefit the society by balancing spiritual needs with material pursuits, as well as social and individual needs. This paper will discuss ways in which Islamic finance can be seen as an innovative way that could substantively redefine finance and also why it is substantively different from conventional finance. Core Elements of Islamic Finance Islamic finance is different from conventional banking and the core notion behind it is that God (Allah) owns all the wealth in the world, over which man is only a trustee. Humans, therefore, have an obligation to manage the wealth in accordance with the commands of Allah that prohibit activities which do not promote justice (Rammal & Zurbruegg 69). One major reason for imposing Islamic ethics and law on finance is to promote and uphold social justice, since Islam is deemed to be inseparable from social justice. Islamic finance is based on the core perspective that prohibits the practice of usury, which means lending money to earn interest, also known as riba. Sharia law defines it as an excess compensation that has no due consideration. Effectively, this underlying factor redefines finance from the Islam point of view. ...
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Islamic finance may be defined as a financial system whose operations are compliant to Islamic law, known as Sharia, and are directed by Islamic economics (Zepeda 19)…
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