Can You Imagine An Interest Free Banking System? Islamic Financing System Is The Answer
Islamic Finance has increased in popularity significantly in recent years, more than 1.2 million people are concerned about putting their money in institutions and accounts that comply with Islamic law. Islamic economics and financial systems are already making trillions of dollars and this shift has gathered a lot of attention for Sharia-based investments.
What makes this different from the traditional finance system is that Islamic system is Riba-free (without interest), it prohibits lending at interest, and borrowers and lenders maintain high moral standards. Let’s read how this system is different from the conventional western banking system which charges interests.
- Shared Profit/Risk System
Interest is forbidden, however, profit is not forbidden. Islamic bankers combine money and enterprise to construct a profit/risk-sharing system based on equity finance, which is the investment of stocks and sales, rather than traditional accrued interest-debt system.
It takes effort for people who are trained in the finance of western design to imagine a banking system which is not based on interest. Nonetheless, as the world begins to rebuild its financial institutions, without interest, Islamic finance offers a challenge to the established norms.
- Solution For Recession Hit Economy
Islamic finance seems like a rescue plan for the recession hit economy. It has much to offer in terms of generating ideas for overcoming the current recession. It has been predicted that the volume of the global economy led by the Islamic financial system will soon reach a significant four percent. Those who are intending to get their Degree in Islamic Finance should remember that this system is not only for Muslims. It offers products and services which everyone can make use of, regardless of religion. Not many people know that it has been several years now, that conventional western banks have been offering Sharia-complaint related products, such as mortgages.
- Interest Free Joint Ventures
Despite the fact that Sharia-compliant banking has many different practices, it is perhaps best known for the way it forbids charging interest (“riba”). The Islamic bank makes arrangement for the client and the bank to share some of the risks and profits, known as “Musharakah” also known as joint ventures.
What primarily distinguishes Islamic banking and finance from the conventional systems is how the system incorporates Islamic moral judgment in its decision. It seems not only to satisfy the quest for profit, but in fairness, ratings of the arrangement and how it will affect all stakeholders it is completely different, because the bank engages in a relationship with its customers based on collaboration.
Get Your Degree in Islamic Finance
Due to the increase in the demand for Islamic Finance globally, universities have started enrolling and preparing students for proper education in Islamic Finance, offering degree programs like Bachelor’s of Science in Islamic Finance, Bachelor’s of Business Administration in Islamic Finance, Bachelor’s of Islamic Banking and Finance. Students are earning their Islamic Finance Degrees and are beginning to become a part of this flourishing banking system.