Overview of Islamic Finance

Islamic finance signifies commercial financial transactions and activities which are in consonance with the principle of shariah, so called the Islamic law. Significantly, there are few major principles as per below lines:

1. the ban on interest or the classical term which is called riba.
2. the ban on ambiguity or gharar
3. the ban on financing economic non-shariah compliant activities
4. the adherence to risk and profit sharing
5. the promotion of ethical investments and transactions which enhance ummah
6. the promotion of real economic activities

The originality of shariah principles are majorly from al-Qur'an and hadith of the Prophet Muhammad (PBUH), which is to emphasize justice and shared risk and responsibility among players in the industry. Hence, all the products sell by bankers must not only derive from the commercial-driven but the most important is in line with the shariah-driven.

Since 1960, the Islamic financial industry grew steadily resulted from few factors as follow:

1. strong growth in OIC economies.
2. shariah research & innovative product development
3. resurgence of ethical value
4. retail and commercial demand
5. Liberalization of capital markets
6.  Institutional capital

 Hope in the next section, I will write further details on this topic. Walluhu'alam - Abdul Hadi Jusoh