The Islamic Banking is financial activity carried out in a way that respects the principles of Islamic law, which prohibits Usury and investment in certain prohibited activities. This basically translates into limitations when setting the interest on the debt, so that the risk of a loan operation is shared equally by the creditor and the debtor. Study at islamic finance courses Islamic Banking and increase your prospects.
Apart from some skepticism about the adaptation of Islamic banking to global banking, the largest banks in the world have been financing Islamic Banking for some time (Islamic bonds are known as Sukuk ) and have even created subsidiary banks only to be managed as Islamic banks. Special laws have even been enacted in financial centers such as London, Hong Kong or Singapore to facilitate the operations of Muslim banks.
Given these developments, it is worth wondering if Islamic banking is really a real alternative to current financial systems and how it should be viewed from a Western perspective. Not long ago, Islamic banking was a “zero percent interest” system that appeared to be inefficient and inadequate to energize any modern economy. Ironically, this system of “i zero percent interest measure “is that Western central banks are using to inject liquidity into the financial systems of the West since the beginning of the crisis.
There are two main precepts in Islamic banking: absolute prohibition of charging interest and high ethical demands for both lender and borrower. The important point is that although interest – usury – is prohibited by Islamic law, profit is not. These are obtained from a series of agreements in which the creditor and the debtor are placed on the same level, sharing risks and benefits. Therefore, Islamic banking contrasts with the dominant system in Western banking, which has been singled out for acting in an asymmetric way and not very balanced with the whole of society.
The second important precept on which Islamic banking is based is strict adherence to a code of ethics for both parties. This should not surprise us if we remember that capitalism itself has its roots in strong Protestant morality, even though it has relaxed over time. These “moral” elements of Islamic banking may turn into competitive advantage at a time when the ethics of the Western financial system have been called into question.
The litmus test for this “new” financial system will be to demonstrate that it is more efficient, ethical, stable and adaptable than the previous system. For now people are in a very embryonic moment since there are neither Islamic currencies nor Islamic central banks that act as such in any financial system. But as the Islamic world continues to grow in size and influence, Islamic banking will be a competitor to the current financial system to be reckoned with. For more articles such as this one, click here.