Islamic financing refers to a banking system that is based on the teachings and principles of Islamic rulings, known as Shariaah, and that operates within their framework. These principles permit Halal dealings only; thus forbidding any transactions with interest charges or Riba. Instead of interest, Islamic financing allows profit (mark-up) and fees on financing facilities that extend to customers. In addition, depositors earn a share of the banks’ profit as opposed to interest.
Inspired from the Qur’an and the sayings and actions of Prophet Mohammed (PBUH), Islamic financing stresses the morals and values of equity and justice. Beside Halal dealings, it is allowed for parties to share profit in transactions. In the meantime, the return on savings and investment accounts vary, depending on the banks’ policies and procedures. Like other profits, transactional profits are not necessarily guaranteed. Still, they ensure better and safer returns.