Islamic Banking
According to an article written by Nick Louth on 23rd May for the Msn Money the “Sharia investment growing in appeal”, he says that the British Muslims face problem in dealing with most of the banks. This is for the reason that most bank accounts, mortgages and investments offers are against Islamic teaching as the offer interest, or riba, which it categorises as usury. Muslims have certain prohibitions when considering investment.
These include abortion, alcohol, defence, gambling, human cloning, pornography, most forms of entertainment and anything to do with pork. However, the usury prohibition bars investment in conventional banks and insurers, and any company which has a gearing of more than 30%. That removes many thousands of potential investments. Due this reason Islamic bank accounts have been available in the
Loans aren’t allowed under Sharia law, those who need bank funding can find it repackaged under Islamic principles. A customer wanting to buy machinery for a factory, for example, would have it bought by the bank who would then charge an agreed premium on top of the cost in exchange for receiving repayment over a number of years. The same principle is harnessed for Sharia mortgages,
While Islamic customers face negligible income losses using Sharia no-interest current accounts compared with conventional rivals, those losses would be much larger on savings accounts where high street rivals offer up to 4.5%. A competitive return was clearly required for deposited savings. The question was how to provide it within Islamic strictures. Islamic Bank of
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