Islamic finance and banking are based on principles that adhere to Sharia law, which prohibits the payment or receipt of interest (riba). The Level 5 Certificate in The Concepts of Islamic Finance and Banking (fast-track) covers the following key principles:
| Principle | Description |
|---|---|
| 1. Sharia Compliance | All financial transactions must comply with Islamic law, which prohibits activities such as gambling, speculation, and investing in businesses that are considered haram (forbidden). |
| 2. Profit and Loss Sharing | Islamic finance promotes risk-sharing between the lender and borrower, with profits and losses shared based on agreed-upon terms. |
| 3. Asset-Backed Financing | Islamic banks must ensure that all financing is backed by tangible assets, promoting transparency and reducing the risk of speculative practices. |
| 4. Prohibition of Interest (Riba) | Islamic finance prohibits the payment or receipt of interest, as it is considered exploitative and unjust. Instead, profit-sharing arrangements are used to generate returns. |
| 5. Ethical Investment | Islamic finance encourages ethical and socially responsible investments, avoiding industries such as alcohol, gambling, and tobacco. |
By understanding and applying these key principles, students in the Level 5 Certificate in The Concepts of Islamic Finance and Banking (fast-track) will gain a comprehensive understanding of how Islamic finance and banking operate in accordance with Sharia law.