If reading this, you already know that Islamic finance is a global market operating through the conventional financial system. In the last couple of years, Islamic finance has grown at a rapid pace globally and is now worth trillions of dollars.
You might be wondering what is the reason behind this surge in Islamic finance usage. Fret not since we are here to help ensure you clear some of the doubts in your mind. Below are some of the most notable benefits accompanying Islamic finance?
Allows for Financial Inclusion
You may already know that the conventional banking system is mostly based on interest payment at a rate pre-set on the deposits of money. Payment and receipt of interests is prohibited in Shariah law. In short, Muslims abstain from banking. But through Islamic banking, financial inclusion can be easily promoted and well leveraged to bring a larger pool of savings in the local and global economy.
Principle of Financial Justice
It is worth mentioning that financial justice is a requirement that helps Islamic finance products function in a Sharia compliant way. The conventional financial system looks at making profit through interest payments and makes the beneficiary liable for any risk. Things tend to be different with Islamic finance as it allows for the sharing of profit/loss and risk involved in proportional manner.
Remember, financial justice remains to be a basic requirement for the effective functioning of Islamic finance products. This is different from conventional financial considering it looks forward to profit through interest payments and makes the beneficiary completely liable for any risk.
But with Islamic financing, it paves ways for the sharing of net profit/loss and the risk involved in a proportional manner between the lender and the beneficiary. For this reason, in the event that a financier is expecting a claim on profits of a project, it is essential that he/she should also carry a proportional share of the loss of that project.
Hopefully, the above guide will help convince you into taking advantage of what Islamic finance offers to Muslims and non-Muslims.
