Sharia finance and Christianity

As Christians debate the ethics of finance and investment, should we be looking to the Sharia compliant Islamic banking sector for guidance? We've learned a lot from Islamic art, architecture, literature and science, but what about the Islamic way with money?

There are now a number of Islamic financial institutions in the UK, catering for the needs of Muslims, who have strict controls over what they can and cannot do in terms of finance.

The basis for all Islamic finance lies in the principles of the Sharia, or Islamic Law, which is taken from the Qur'an and from the example of the Islamic Prophet Muhammad.

The principle and most obvious difference between Islamic and ‘conventional’ banking is the need for the absence of interest.

Samir Alamad, Senior Manager, Sharia Compliance and Product Development, Islamic Bank of Britain PLC explained that as interest is gained by the ‘effortless’ lending of money, it is not allowed under Islamic law.

He said: "Islamic banking operates without interest, which is not permitted in Islam, as money in itself is not considered to have intrinsic value.

“As interest is income generated from lending money, it is seen as effortless return. Instead money must be used in a productive way and wealth can only be generated through legitimate trade and investment, which involves an element of risk.”

But this in itself does not rule out the prospect of investment in businesses or ventures which are of dubious ethical quality. However, another key part of Islamic finance is that profit may not be made from businesses which are considered unlawful under Sharia. These include gambling, pornography, tobacco and so on.

Savers with Islamic banks are able to grow their money though, for example by means of an ‘agency agreement’ known as Wakala, which means the bank can invest money acting as an agent on behalf of their clients.

If the (Sharia compliant) business with which the money is invested is profitable, then the deposit holder as the investor is able to earn money on their investment.

The Islamic banks closely monitor the performance of their investments on a daily basis, in order to try and ensure that customers receive the projected target, or ‘expected’ profit rate.

Samir Alamad added: “ The whole premise of Islamic banking is to provide a way for society to conduct its finances in a way that is ethical and socially responsible. Trade, entrepreneurship and risk-sharing are encouraged and these are the financial principles that underpin Islamic finance and the products offered by IBB.”