Sharia finance
Sharia finance is the system governing Islamic banking, which can now be found in many locations worldwide. This system of banking is designed to allow people of the Islamic faith to carry out financial transactions without breaking sacred laws detailed in the Quran and other teachings – but the benefits of Sharia banking are not limited exclusively to Muslims.
One of the most prominent features of Sharia finance is the opportunity to take out interest-free loans. According to Islamic principle, people should not be financially punished for borrowing money in the short term when they need it most. This charitable and ethical attitude to money lending, saving and investing can be seen in other Sharia banking practices too, which adheres to the principle of Zakat – the responsibility of Muslims to make donations to charity based on a percentage of their annual earnings.
Islamic financial institutions bear this responsibility too, and in the case of Sharia banks located outside the Islamic world – such as Sharia finance arms operated by major international banks – donations are typically made to projects that aid the international community. This charitable attitude has served to make Sharia banking more popular than standard forms of banking in some Western countries such as the UK, where standard banks have faced much criticism in recent years.
In addition to this charitable streak, Sharia banking is also popular for its strong risk management, which aims to ensure that all transactions and investments made carry minimal risk for customers. Tthis allows Muslims to carry out banking without having to sacrifice important tenets of their faith, and can also make Sharia banking a more secure option for all people who wish to avoid losing money on risky investments.
Sharia finance has faced some criticism since its introduction to the Western world, particularly among more right-wing media sources which tend to focus more on what the banking system prohibits than its many unique benefits. As well as prohibiting risky investments and excessive lending (essentially forms of gambling), Sharia banking does not traditionally endorse investments in products or services that are forbidden by Islamic teachings, such as alcohol.
While this can create some issues when Sharia banking is used in Western countries, many financial experts and borrowers agree that Islamic finance is beneficial for offering an alternative approach to banking for millions of people, regardless of whether they may be drawn to it for religious reasons or out of appreciation for its more ethical approach to finance.