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An Islamic Development Bank branch in Dhaka. Sharia and securities trading is the impact of conventional financial markets activity for those following the islamic religion and particularly sharia law. Sharia practices ban riba (earning interest) and involvement in haram. It also forbids gambling and excessive risk (bayu al-gharar).
Islamic rules on transactions (known as Fiqh al-Muamalat) have been created to prevent use of interest. Investing in businesses involved in activities that are forbidden . These include things such as selling alcohol or pork, or producing media such as gossip columns or pornography. [10] [11] Charging extra for late payment.
Riba (Arabic: ربا ,الربا، الربٰوة, ribā or al-ribā, IPA:) is an Arabic word used in Islamic law and roughly translated as "usury": unjust, exploitative gains made in trade or business.
The large US-based Citibank began to offer Islamic banking services in 1996 when it established the Citi Islamic Investment Bank in Bahrain. [65] The first successful benchmark for the performance of Islamic investment funds was established in 1999, with the Dow Jones Islamic Market Index (DJIMI). [65]
Haram (/ h ə ˈ r ɑː m, h æ ˈ-, h ɑː ˈ-,-ˈ r æ m /; [1] [2] Arabic: حَرَام ḥarām [ħɑˈrɑːm]) is an Arabic term meaning 'forbidden'. [3]: 471 This may refer to either something sacred to which access is not allowed to the people who are not in a state of purity or who are not initiated into the sacred knowledge; or, in direct contrast, to an evil and thus "sinful action ...
In any event, a few Islamic banks have failed over the decades. In 1988 the Islamic investment house, Ar-Ryan collapsed causing thousands of small investors to lose their savings (they were later reimbursed for their losses by an anonymous Gulf state donor) [129] and dealing a blow to Islamic finance at the time. In 1998 the management of Bank ...
On the liability side, Feisal Khan argues there is a "long established consensus" that debt finance is superior to equity investment (PLS being equity investment) because of the "information asymmetry" between the financier/investor and borrower/entrepreneur – the financier/investor needing to accurately determine the credit-worthiness of the ...
A supporter of Islamic economics describes a "major difficulty" faced by Islamic reformers of Islamic economics and pointed out by other authors, namely that because a financial system is an "integrated and coherent structure", to create an Islamic system "based on trust, community and no interest" requires "changes and interventions on several ...