The term ‘Islamic finance’ also known as ‘Sharia Finance’ may be a daunting one for some groups of individuals. After all, with the talk surrounding finances and its many branches in this burgeoning field, it may be confusion to a layperson. However, Islamic finance refers to how businesses and individuals raise capital in accordance with Sharia, or Islamic law.
Having said that, a common misconception is that Islamic finance is only limited to Muslims. However, this is far from the truth considering Islamic finance is open to anyone. However, all of Islamic finance is under Sharia law.
There are several remarkable benefits that Islamic finance offers, and, in this blog post, we will go through the top advantages in choosing Sharia finance.
Principle of Financial Justice
You might not know this, but under Sharia law, financial justice is a requirement that helps Islamic finance products function. The conventional banking system looks at making a profit via interest payments and borrowers or beneficiaries are held responsible for any risk.
In the realm of Islamic finance, the sharing of profit and loss as well as risk involved is done in a proportional manner between the lender and beneficiary. For instance, in the event that a financier is expecting a claim on profits of a project, it is also vital that the same financier be responsible for a proportional share of the loss of that project if it goes south.
Streamlined
Despite the sheer fact that Islamic finance comes with its own set of complex rules, you’d be happy to learn that it is far simpler to grasp as compared to conventional banking. And this can be attributed to the fact that Islamic financial institutions have scholars available who provider consumers guidance with every venture and make sure that every single transaction is undertake in accordance to Sharia law.
If this is not enough, Islamic finance is stricter when it comes to contracts. Whether you are Muslim or not, you should consider having Islamic finance as part of your financial portfolio to reap maximum benefits.
