{"id":2238,"date":"2014-12-23T17:38:39","date_gmt":"2014-12-23T17:38:39","guid":{"rendered":"https:\/\/work2.dossetenta.com\/lupicino\/2014\/12\/23\/basics-of-the-islamic-financial-system\/"},"modified":"2014-12-23T17:38:39","modified_gmt":"2014-12-23T17:38:39","slug":"basics-of-the-islamic-financial-system","status":"publish","type":"post","link":"https:\/\/lupicinio.com\/en\/basics-of-the-islamic-financial-system\/","title":{"rendered":"Basics of the Islamic financial system"},"content":{"rendered":"

Islamic finance, just like politics and daily life, try to follow the rules written in the Qur\u2019an (governed by the Sharia<\/em>, or the code of conduct for Islamic life) as faithfully as possible. For the Muslim world this financial model assumes a more ethical form, as it is an integral part of a way of life, another area regulated by Islam.<\/p>\n

This model of Islamic finance was born in order to reconcile the Sharia<\/em> with the global business world, so it is important to mention that it does not necessarily mean an alternative to conventional finances, rather an integral part of global finance. Currently Islamic finance is currently booming with an annual growth above 15%.<\/p>\n

The beginnings of Islamic finance can be traced back to the end of the 19th<\/sup> Century, when the British bank Barclays established an office in Cairo. The cultural and financial crash which the establishment of a European banking entity with a Western financial model involved led to criticism due to, amongst other reasons, the charging of interest, as it is considered usury and is punishable under Islam\u2019s Sharia<\/em> law. Ever since this initial approach, the development of alternative financial instruments began so that the laws established by the Sharia <\/em>would be respected at all times. Subsequently, Islamic financial institutions focused on the Muslim population and operating under the Sharia<\/em> have been emerging.<\/p>\n

Such is the growing importance of Islamic finances in recent times that international entities in the world of finance such as Dow Jones<\/em>, Financial Times <\/em>and Standard & Poors <\/em>have created special stock exchange indexes for Islamic finance, which exclude companies whose activities clash with the principles of Islam.<\/p>\n

Due to the economic growth of Islamic countries in recent decades, the Western world has begun to show interest in the financial products of these countries. Yet today there are still large differences that exist between conventional and Islamic finance, which are making certain international banking entities comply with the regulatory framework that Islamic finance requires.<\/p>\n

The Islamic financial system is based on religious and cultural pillars, as mentioned above, which give it this special and distinct tenor in comparison to our financial system. These distinguishing pillars are as follows:<\/p>\n