Objectives of Islamic Finance achieved by Islamic Banks

Abstract

Islam provides guidance to its adherents in all phases and activities of life, in matters material as well as spiritual. Its basic teachings with regard to economics is mentioned in several passages of the Qur'an. Far from despising material well-being, it recognizes

وَلاَ تُؤْتُواْ السُّفَهَاءَ أَمْوَالَكُمُ الَّتِي جَعَلَ اللّهُ لَكُمْ قِيَاماً وَارْزُقُوهُمْ فِيهَا وَاكْسُوهُمْ وَقُولُواْ لَهُمْ قَوْلاً مَّعْرُوف(1)

 that,"Do not give the feeble-minded your property that Allah has made a means of support for you, and do feed them from it, and clothe them, and speak to them in fair words... . . .";

The basic principle of Islamic Finance are prohibition of interest and usury in financial dealings  (2) , avoidance of Gharar (uncertainty) in a business transaction (3),  avoidance of Myser (speculation) or any game of chance (4), profit  and  loss  sharing (according to  this  principle  an  investor  can  earn  return  on  his  investment  subject  to  risk  of loss ) (5) financing  for  only  Halal (permitted)  businesses (activities  such  as  liquor,  pork,  pornography,  adultery,  dance  clubs, conventional banking, etc. are unlawful) (6) Asset Based Financing (7) the Sanctity of contracts and preservation of property rights (8) To conclude Islamic financial system ensures justice between savers and investors.