Islamic Finance Essay

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Islamic Finance Islamic finance, in accordance with Islamic law, is based on two principles: the prohibition of interest, also known as wear and social responsibility investment. It links more closely the financial profitability of an investment with the results of the specific project partner. Islam prohibits both civil and commercial transactions by resorting to the interest. A special type of Islamic finance at is interesting and worth exploring is the Islamic Banking. Islamic banking has the same purpose as conventional banking; the only difference is that the major source of Islamic banking is Sharia’ (the Islamic law coming from the Koran and the prophet’s thoughts). The major difference Islamic finance has with normal banking is that Sharia’ forbids interest rates on loans to be consistent with the Islamic legal code that prohibit this practice. The Islamic banking concept started as an official banking type with the first Islamic bank in 20th century. It was exactly in 1975 that the first Islamic bank launched in Dubai in a time of celebration of the 15th century Islamic calendar. This does not mean that before Islamic law was not respected practiced. There is evidence from the middle ages of the use of Islamic finance by Muslim merchants as these were very known for their skills in trade in ancient times. It is even claimed that concepts, techniques, and instruments of Islamic finance were later adopted by Europeans financers and businessman. Nowadays, the concept of Islamic banking is still concentrated in the Middle East and Central Asia where banks fully Islamic exist. In other parts of Islamic world, this practice is not very frequent as in Morocco where some conventional banks offer some of the products of Islamic banks. The number of Islamic banks increased rapidly. In 2006, there were 170 Islamic financial institutions in Pakistan. Like the

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