The Islamic way of banking has always fascinated me. This is a method of banking that is practiced around the world and is one that greatly varies when compared to the more conventional way of banking. The laws governing banking, for Muslims, are extremely strict. Every Muslim has to adhere to these laws and, without a doubt, every Muslim does. The rules of Islamic banking are complex and interesting. This essay is about some of them.
Sharia Law is the law of Islam. It is a legal system that every Muslim has to abide by. It is a fairly strict set of laws although many imams have given it some leeway. The Sharia Law covers a wide range of topics and this law pertains to how a Muslim conducts his financial transactions. The most outstanding law is the one where the charging and receiving of interest is strictly prohibited. This is known as Riba. According to the Muslim financial law, money cannot earn interest or profit. In other words, if a man lends money to another Muslim, he is not allowed to charge interest for the loan given. The only thing the lender should receive, upon giving the loan, is the thanks and the repayment. Similarly, a Muslim cannot deposit money and expect that money to gain any interest in an account.
According to Islamic Banking investments embarked on require careful consideration. It is the religious duty of a Muslim to ensure that the investment is good and wholesome. They should pay close attention to the business to be invested in, the policies of the business, the products of the business and the services, as well as, the impact the business has on society. For example, if a Muslim wants to invest in the share market, he needs to look into the activities of the companies and ensure that the companies practice Sharia Law. If the companies do not, Muslims cannot invest in them.
The moral and social values of Islamic banking also deserve consideration. According to the Qur’an, everyone who follows it needs to support the destitute and the poor. All Islamic financial institutions are to provide support to those who need it. Unlike the charities many other religions are involved in, this support is given as profit-free loans by the various institutions. This is a must and has to be done. For example, if a Muslim is in need of money for an operation, the banks have to lend him the money as a profit-free loan. This loan is for a year and no interest is charged for it.
The final rule of Islamic banking is the risk involved. According to Islam, both parties should share the risk and profit of the venture. This has to be done. If not, the person is considered a sinner. A person is liable for profit only if there is some risk involved.
The Sharia Board is established in order to ensure that these rules of Islamic banking are followed. This Board includes bankers, lawyers and religious scholars who know the Islamic Law in and out.
These rules of Islamic banking affect not only the Muslim community; it also affects a country’s economy. In this day and age, where interest rates and returns concern all investors, the Islamic way of banking can only be negative to the economy of a country.