London School of International Business (LSIB)

What are the key principles of Islamic finance covered in the Ofqual Level 5 Certificate Concepts of Islamic Finance and Banking qualification?

Key Principles of Islamic Finance Covered in Ofqual Level 5 Certificate Concepts of Islamic Finance and Banking Qualification

Islamic finance is based on principles that adhere to Sharia law, which prohibits the payment or receipt of interest (riba) and promotes risk-sharing and ethical investments. The Ofqual Level 5 Certificate Concepts of Islamic Finance and Banking qualification covers the following key principles:

Principle	Description
1. Prohibition of Riba	Islamic finance prohibits the payment or receipt of interest, as it is considered exploitative and unjust.
2. Risk-Sharing	Partnerships and profit-sharing arrangements are encouraged, promoting shared risk and reward among parties.
3. Ethical Investments	Islamic finance promotes investments in ethical and socially responsible projects, avoiding industries such as gambling, alcohol, and tobacco.
4. Asset-Backed Financing	Transactions must be backed by tangible assets, ensuring transparency and reducing speculation.
5. Prohibition of Gharar	Islamic finance prohibits excessive uncertainty (gharar) in contracts, promoting clarity and fairness in transactions.

By understanding and applying these key principles, individuals and institutions can engage in Islamic finance in a way that aligns with their values and beliefs, while also promoting financial stability and social responsibility.