Halal banking

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Global opportunities for every client. The relevance of Islamic bank products as an alternative in the financial market

What does the concept of “Islamic banking” include?
This concept means a certain way of doing banking, consistent and not running counter to the Muslim principles of conducting monetary transactions. The main rule of Islam in matters of financial transactions is the complete rejection of futures transactions and the prohibition of levying interest by a banking institution.
It is a financial activity based on the principles of Islam, and its practical application encourages the development of the Islamic economy.

Islamic Bank – a bank conducting its banking activities within the framework of Sharia law.

Islamic Bank does not participate in transactions in which the following conditions are present:
• production and sale of alcoholic, drug and tobacco products;
• raising and selling pigs, as well as the production of non-halal products;
• financing of the sphere of entertainment and gambling.

Principle of operation
Investors turned their attention to Islamic banking in the difficult conditions of the crisis, and more and more people are trying to understand in more detail the difference between this system and traditional banking and financial instruments for doing business. The closest to Islamic banking is such a banking form as project investment associated with equity participation and risk sharing. This technique assumes that the Islamic bank does not receive interest and must more carefully study the client who applied for investment, his business plan and analyze the possible risks.
Islamic banking strictly prohibits operations with swaps, futures, as well as operations with all categories of services and goods that have not yet been produced – operations are carried out only with tangible and intangible assets that are currently available.

If a person invests money in an Islamic bank, then he does not give this money at interest, but invests in a useful real business, which involves the production of certain goods and services. Any financial instruments in Islam are built so that this condition is fulfilled, but also a profit was made from this activity.
This is the difference between the Islamic banking system and the capitalist one: a traditional bank buys and sells money, and the benefit of financial activity is obtained from the interest of the loan. An Islamic bank for financial business is changing the credit basis to an investment one: an Islamic bank opens accounts and accumulates funds of its depositors on them, from these funds entrepreneurs are financed, who share the profit received as a result of their activities with the bank, instead of paying interest.
For Islamic banking, the main principle is that the remuneration of the depositor or the bank is not initially guaranteed – this remuneration will be derived from the profit that will be obtained as a result of the business. Economic turnover is not based on lending, as is the case in the mainstream banking system.
An Islamic bank builds its work on the basic principle, which assumes that money cannot grow when it is issued in the form of a loan, since it is not a commodity. Therefore, the lender will receive a profit and can count on it only when he invests his money in the economy, that is, real added value is created.
In Islam, those deposits and loans that are applied in an ordinary bank are outlawed – that is, those on which interest is charged. Interest-bearing securities or bonds are also prohibited.