Prohibitions in the Islamic financial system

In general, Islamic Sharia has consistently sought to ensure fairness, trust and transparency in all financial and business transactions while emphasizing socio-economic development and financial inclusion.

In this short article, I will attempt to describe the main features of Islamic finance and Sharia-approved investments, as well as the categories of prohibitions and how they relate to Islamic values.

In practice, most Islamic financial institutions have established their own internal board of high caliber religious scholars and advisers who carefully review every financial transaction / investment to ensure its compliance with Sharia law.

Sharia – literally meaning a clear path to follow and observe – first promotes the principle of profit and loss sharing between financial institutions and entrepreneurs, thus emphasizing the spirit of cooperation in business that would absorb the weight of the loss by sharing it equitably.

From an Islamic point of view, the concept of collateral for assets is widespread, thus discouraging financial speculation as it is not allowed in Islam. Sharia law also encourages ethical, sustainable and environmentally friendly finance while promoting financial inclusion. Therefore, in accordance with Islam’s main goals of emphasizing social welfare and supporting financial stability, these explicit intrinsic forces form the backbone of the Islamic financial system, gaining even greater appreciation. of the distinct nature of Islamic finance.

These and other Sharia guidelines have shaped the types of financial transactions adopted by Islamic financial institutions. Thus, they have developed certain contractualization models based on a concept without interest and without risk to meet the needs of the market while covering the main currents of thought.

The practical implications

One of the main purposes of imposing these laws in Islam is to promote social justice and economic development. The Islamic code of conduct thus plays a vital role in keeping and nurturing society in a harmonious state, while striving to make the world a better place to live. In this context, Islam considers the natural resources of the world and even human life. himself, as a trust from Allah. As a result, as we move more and more towards rapid development, these laws encourage believers to effectively manage resources and opportunities for future generations.

From a sharia perspective, ethics dominates the economy and not the other way around. Business ethics are an integral part of Sharia law, which is based on certain foundations and principles on which ethical values ​​are based. Here, the basic principles of business ethics can be characterized as follows: Fairness, integrity, dignity, loyalty and justice.

Prohibitions in Islamic finance

Islam is not only a religion, but also a whole way of life. In finance, Islam requires that all transactions be based on transparency, accuracy and trust. In view of this, the Sharia has established rules in relation to Fiqh Al Muamalat which refers to financial or economic transactions in a general framework. Since this is a rules-based financial system, it is important to understand clearly what the basic rules are and how this system is different from others.

There are four main categories prohibited in Islamic financial transactions listed below:

The first category is made up of items prohibited from the outset; there is no debate on their legitimacy. The main practices considered illegal in Islamic finance are usury (riba), ambiguity in contracts (gharar) and gambling (maysir). Riba is haram in all its aspects. It is considered an unwarranted increase in borrowing or lending money. While gharar is forbidden by Islam because it is associated with uncertainty, deception and risk; maysir is prohibited on the grounds that money must be earned through work and effort, without involving a game of chance.

The second category includes items that are prohibited if they are true. Here remains a deep skepticism as to the legal interpretation of each, i.e. threat (tahdeed), error (ghalat), injustice (zulm), deception (khedaa) and exploitation. (istighlal).

As for the third category, it consists of a single practice prohibited in Islam because it leads to inequality., and it’s the monopoly or Ihtikar in Arabic. Monopoly is absolutely prohibited and prohibited in Sharia law.

The last concerns fraudulent misconduct and blackmail. Fraud literally means deception practiced for unjust gain. Under civil and criminal law, fraud is morally wrong and is considered a crime like theft. The blackmail is also false because the blackmail proposal is intimidating.

Compliance with the precepts of the revealed law is a common obligation and the prohibitions are extended to investment in alcohol, pork products and the adult entertainment industry. Noting that the most important Islamic virtues are prescribed both at the individual level and at the collective level.

Therefore, all Islamic financial transactions must be exempt from the above mentioned items, otherwise the transactions would be null. These salient features are fundamental to Islamic finance which distinguishes it from conventional finance.

In conclusion, although the Sharia applies certain prohibitions and imposes unique structural requirements on the types of investments approved, I believe these characteristics should be attractive to both the Islamic investor and any socially responsible investor since the aim of The background above is to stress that an economic and financial system focused on social well-being and a socially responsible mandate will lead to advancing financial inclusion and catalyzing and promoting true economic development.

Islam places a heavy responsibility on the human being, he alone being held responsible for any lack of development, and he alone behind the strengthening of social and economic empowerment.

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Don F. Davis

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