Islamic finance is based on interpretations of the four races. Has two central themes. That there may be interest earned on loans and socially responsible investment is a requirement.
The beginning of modern Islamic finance began in May 1970, when the need for such funding has been achieved by small-scale attacks against people who did business in accordance with the principles of Islamic law or shari’a. Shari’a is the Arabic word for Islamic law as a way of life. Another term is relevant to understand fiqh, which is generally translated as philosophy of law and the interpretation of Shari’a fuqha circumstances or specialized legal experts. Due to the complex nature of Islamic law of Shari’a, the Islamic Finance market players generally refers to a board of Shari’a, to review and approve financial transactions under the capital adequacy.
Islamic Contracts
Islamic finance is primarily for use by people of Muslim religion. Despite some differences in understanding the various forms of Islamic commercial contracts, which is commonly used can be divided into three broad categories. They are:
1) the exchange contracts
2) The lease
3) Contracts of partnership investment
Exchange contracts
The exchange contract is essentially a contract where one party (with money) to purchase the item and then sells to a third party (which requires funding) outside the agreement. This supplement is closely tied to interest rates in force. This type of contract is given the name of murabaha classical Arabic.
Leasing
Praise also called the decline of the partnership agreements. This type of contract is known as the Arab Mutanaqisa Musharaka or Ijara.
In terms of this agreement, the owner of the funds for purchasing items and then leases the property to customers on monthly payments. The monthly payments are calculated as part of the rent and the amount of capital.
Investment contracts Partnership
This type of contract is generally used to finance consumers through three shares known as the Tawarruq Arabic. The basic principle of these contracts is that the owner of the money they pay to buy a certain quantity of a commodity and sell to customers in a credit agreement on an increase. The customer sells the goods to a third party who want your money with the ability to repay the loan over time. The loan will be equal to the sum of the loan principal plus the profit margin is often equal to the rate of interest. The group purchasing of goods is often the same party that sold the money owner.
Interest expense in Islamic finance
Shari’a forbids RIBA / wear and the result was that Islamic finance is based “active”. This means that you can not pay or receive interest on money, as in other Islamic financing contracts.
Acceptable practice in Islamic finance
Islamic financial contract treatment is generally agreed that trade negotiations must meet certain practices acceptable. These can be summarized as follows:
1) The contract price for the item to be financed at a price that is mutually acceptable to all parties to the contract.
2) The price agreement should not be forced.
3) The contract must be between the parties who are mentally healthy and able to make rational decisions.
4) The parties to the Agreement must be big enough to understand the implications and consequences of entering into such contract or agreement. (In other words, are mumayiz)
5) The presentation of the facts relevant to the subject in contact with the / s must be no ambiguity or deception (gharar). This often refers to the quality of the product or the ability of the seller to return the items.
6) No contract under Islamic finance in May contradict or oppose a value that is forbidden by Islamic law.
Conclusion of Islamic finance
In an article published 0n March 4, 2009 by Lorenzo Totaro at Bloomberg.com reported that “The Vatican has said that banks should consider the rules of Islamic finance to restore confidence among its customers at a time of global economic crisis. This type of Islamic Finance section provides more and more under the care of the institutions of financial integration.
Islamic financial institutions are expanding at a rate between 10 and 15% a year, with signs of growth to develop in the future. Conservative estimate indicates that the assets of over $ 500 billion managed by Islamic financial principles.
With the explosion of the need for Islamic finance in the world is important for all users and landowners to become familiar with the principles behind these important and growing markets.
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