Q: How is Islamic (Shari’ah) finance any different to normal commercial bank finance? In both types of finance, you pay more money than you initially borrowed. In fact, in most cases, when you compare the two options, Islamic finance costs more. Is Islamic finance really halaal?
A: As far as conventional commercial banks are concerned; the bank earns money through giving loans on interest. As for Islamic banks, they do not earn wealth through providing interest-bearing loans, but rather purchase the commodity and thereafter sell it or lease it to the client at a higher price adding a profit. Hence, in the operation of both there is a principle difference, provided the Islamic concepts and principles are applied correctly.
However, it should be noted that the operations of many Islamic banks are not consistent with the Islamic concepts and modes of trade and commerce. Many a time, the Islamic concepts are not adhered to correctly, resulting in the transaction being impermissible. It is therefore not possible to issue a blanket ruling on the workings and operation of all Islamic banks. Nevertheless, if any particular case is brought before us, we will be in a better position to issue a ruling of permissibility or impermissibility.
And Allah Ta'ala (الله تعالى) knows best.
Answered by:
Checked & Approved: