Islamic banking operates within the framework of Level 5 Certificate Concepts of Islamic Finance and Banking (fast-track) by adhering to the principles of Sharia law. This means that all financial transactions must be conducted in a manner that is compliant with Islamic law, which prohibits the payment or receipt of interest (riba).
One of the key principles of Islamic banking is the concept of profit and loss sharing, where the bank and the customer share in the risks and rewards of any investment. This is in contrast to conventional banking, where the bank earns a fixed rate of interest on loans regardless of the success or failure of the investment.
Another important aspect of Islamic banking is the prohibition of investing in businesses that are considered haram (forbidden) according to Islamic law. This includes industries such as alcohol, gambling, and pork production.
Overall, Islamic banking operates within the framework of Level 5 Certificate Concepts of Islamic Finance and Banking (fast-track) by providing financial services that are in line with the principles of Sharia law, promoting ethical and socially responsible investing, and offering an alternative to conventional banking for those who wish to align their financial practices with their religious beliefs.
| Key Points | Description |
|---|---|
| Sharia Compliance | All financial transactions must adhere to Islamic law. |
| Profit and Loss Sharing | Bank and customer share risks and rewards of investments. |
| Prohibition of Haram Investments | Bank cannot invest in forbidden industries. |