Islamic Banking

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Principles

The principles of Islamic finance are as old as Islam itself.

Islamic teaching does not allow a fixed return on capital, as charging and receiving interest (riba) is forbidden.

The term Sharia'a refers to Islamic law as revealed in the Qur'an and through the example of the Prophet Muhammad (peace be upon him).

The authority of Sharia'a is drawn first and foremost from the specific guidance laid down in the Qur'an.

The second major source is the Sunnah, which translates as the Way and refers to the way in which the Prophet Muhammad (peace be upon him) lived his life. This is based on Ahadith, which is a collection of everything that Prophet Muhammad (peace be upon him) said, did, or approved of.

Another important source is Qiyas, which involves the interpretation and analysis of existing law to suit modern-day situations.