London School of International Business (LSIB)

What are the ethical considerations in Islamic finance and banking?

Islamic finance and banking operate under the principles of Sharia law, which prohibits certain activities such as charging interest (riba) and investing in businesses that are considered haram (forbidden). When it comes to ethical considerations in Islamic finance and banking, there are several key principles that practitioners must adhere to:

Principle	Description
Avoidance of Riba	Islamic finance prohibits the charging or paying of interest, as it is considered exploitative and unjust.
Risk-sharing	Parties involved in Islamic finance transactions are required to share both profits and losses, promoting fairness and accountability.
Avoidance of Gharar	Islamic finance prohibits excessive uncertainty or ambiguity in contracts, ensuring transparency and clarity.
Ethical Investments	Islamic finance encourages investments in socially responsible businesses that align with Islamic values.

By adhering to these ethical considerations, practitioners of Islamic finance and banking can ensure that their transactions are in line with Sharia principles and promote financial inclusion and social justice.