Islamic finance is a financial service that follows the principles of Shariah, or Islamic law. Islamic finance is based on the concept that money itself has no intrinsic value.
As a matter of faith, Islamic law does not allow lending money to, or receiving money from, someone, and expecting to benefit with interest (known as Riba). Therefore, to make money from money is forbidden; wealth can only be generated through legitimate trade and investment in assets.
The overarching principle of Islamic finance, which distinguishes Islamic finance from conventional financing, is that payment and receipt of interest is strictly prohibited under Islam. Islamic finance therefore is governed by a set of rules that prescribe how to conduct business and do trade within an economy based on justice for all participants. In addition to the prohibition on charging interest, Islamic financial transactions must be free from ambiguity or speculation in any form.
Islamic finance in the Middle East and North Africa (MENA) countries has now become an important element on their societies’ development agendas. It is a fast growing sector as it caters the financial needs of people without conflicting with their religious and social values.