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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).
Both Sukuk and bonds must issue a disclosure document known as a prospectus to describe the security they are selling. To give investors an idea of how much risk is involved in particular sukuk/bonds, rating agencies rate the credit worthiness of the issuers of the sukuk/bond. [39] Both sukuk and bonds are initially sold by their issuers.
Most Muslims and most "non-Muslim observers of the Islamic world" believe that interest on loans (also on bonds, bank deposits etc.) is forbidden by Islam. [198] Such loans—or banks that make them—are sometimes referred to as ribawi , i.e. carrying riba .) [ 199 ] [ 200 ] [ 201 ] This "orthodox" position [ Note 32 ] is fortified by ...
In Islamic jurisprudence , Bai-muajjal, also called bai'-bithaman ajil, [284] or BBA, is a credit sale or deferred payment sale, i.e. the sale of goods on a deferred payment basis. In Islamic finance, the bai' muajjal product also involves the price markup of a murabahah contract, and a murabahah product involves a bai-muajjal deferred payment.
According to the Islamic Microfinance Network website (as of circa 2013), [261] [262] there are more than 300 Islamic microfinance institutions in 32 countries, [263] The products used in Islamic microfinance may include some of those mentioned above—qard al hassan, musharaka, mudaraba, salam, etc. [264]
There are also Islamic investment funds and sukuk (Islamic bonds) that use murabahah contracts. [4] The purpose of murabaha is to finance a purchase without involving interest payments, which most Muslims (particularly most scholars) consider riba and thus haram (forbidden). [5]
Structure of simple mudaraba contract [11]. Mudarabah is a partnership where one party provides the capital while the other provides labor and both share in the profits. [12] [13] The party providing the capital is called the rabb-ul-mal ("silent partner", "financier"), and the party providing labor is called the mudarib ("working partner").
In March 2009, Usmani [6] declared that 85% of Sukuk, or Islamic bonds, were "un-Islamic". [46] (At the time Usmani was chairman of the board of scholars of the Accounting and Auditing Organization for Islamic Financial Institutions, or AAOIFI, which sets standards for the global Islamic Banking industry). Others (Hassan Heikal) have also ...