Islamic banking operates on principles that prohibit interest (riba), speculative transactions (gharar), and investments in activities deemed unethical or harmful, such as gambling, alcohol, and tobacco. Instead, it emphasizes profit-sharing, ethical investments, and asset-backed financing.
Profit-Sharing
Instead of interest, Islamic banks use profit-sharing models like Mudarabah and Musharakah, where profits and losses are shared between the bank and the customer.
Ethical Investments
Investments are screened to ensure they comply with Islamic values, avoiding sectors like gambling, alcohol, and tobacco.
Asset-Backed Financing
Financing is linked to tangible assets, reducing speculation and ensuring transactions are based on real economic activity.
Interest-Free
Islamic banking prohibits interest, replacing it with profit-sharing and other permissible financial instruments.
Risk-Sharing
Both the bank and the customer share the risks and rewards of the investment or financing.
Transparency
Transactions are transparent and based on clear contracts, ensuring both parties understand the terms and conditions.
Ethical and Socially Responsible
Aligns with ethical and social values, promoting responsible investing and avoiding harmful activities.
Fair and Equitable
Ensures fairness and equity in financial transactions, with both parties sharing profits and losses.
Stable and Secure
Focuses on asset-backed financing and avoids excessive speculation, contributing to financial stability.
Halal Mortgage
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