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 course 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. Instead, profit-sharing arrangements are used to ensure fair and ethical transactions. |
| 2. Risk-Sharing | Islamic finance promotes risk-sharing between parties, where profits and losses are shared based on the agreed terms of the contract. This encourages transparency and accountability in financial transactions. |
| 3. Ethical Investments | Islamic finance encourages investments in ethical and socially responsible projects that benefit society as a whole. Investments in industries such as alcohol, gambling, and tobacco are prohibited. |
| 4. Asset-Backed Financing | Islamic finance emphasizes asset-backed financing, where transactions are backed by tangible assets such as real estate or commodities. This reduces speculation and promotes stability in the financial system. |
By understanding and applying these key principles of Islamic finance, students enrolled in the Ofqual Level 5 Certificate Concepts of Islamic Finance and Banking course will gain a comprehensive understanding of how Islamic financial systems operate and the ethical considerations that guide them.