Islamic Banking and Finance
Islamic finance refers to the means by which corporations in the Muslim world, including banks and other lending institutions, raise capital in accordance with Sharia (Islamic law). It also refers to the types of investments that are permissible under this form of law. As such, a more correct term for Islamic banking is sharia compliant finance.
Sharia prohibits acceptance of specific interest or fees for loans of money (known as riba, or usury), whether the payment is fixed or floating. Investment in businesses that provide goods or services considered contrary to Islamic principles (e.g. pork or alcohol) is also sinful and prohibited. Although these prohibitions have been applied historically in varying degrees in Muslim countries/communities to prevent un-Islamic practices, only in the late 20th century were a number of Islamic banks formed to apply these principles to private or semi-private commercial institutions within the Muslim community.
