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In recent times, the international interest in Islamic Banking has been strongly rising all over the world, probably also due to the current financial turndown. No wonder, as up to now too many cultural barriers had been erected, so that everything but the real values of this financial system had been discovered by Western Countries.

Now that the capitalistic system is suffering, many international banks, investors and companies are approaching Islamic Banking, which could represent a real surprise in terms of chances for the future.

The most general rule which Islamic Banking is based on is perhaps the one about the responsibility in financial operations, which is to be shared between/among the parts. This means that until the end of a determined operation every part involved will take on its shoulders a part of responsibility, which is proportional to one’s corresponding share.

Islamic mortgage
Let’s make a practical example: Hibah (free gift), is a very common procedure by means of which a person or a bank grants a loan and agrees together with the debtor the terms and conditions of repayment, that can take place in several steps or just in a single instalment. What’s new? You would say: Nothing, up to now! But, and here comes the surprising discrepancy with capitalism, there are no interests to be redeemed! Yes, it’s true, as interests are viewed as usury and consequently not taken into consideration by Islamic Banking. As a result, a creditor can be given a free gift, (Hibah) which is selected by the debtor and can be of any kind. Sometimes can happen that the debtor is not able to offer his/her gift at the right time: he can postpone Hibah or inform that he/she is experiencing some trouble about it. No problem, he/she does not suffer any legal claim from the creditor, as nobody can be sure of receiving Hibah.

Furthermore, Islamic Banking rejects every form of financial action that it evaluates morally and socially prejudicial on the basis of its certain code of values.

Another clear concept in the “basic tissue” of Islamic Banking is wisdom: but how can this philosophical theme find a place in a financial system, where we have been steadily getting used to worry just about the highest result by means of the minimum effort? Not in the case of Islamic Banking: here it comes to wisely administrating one’s estate, which also means not to gather too much. Actually, money must circulate with a certain balance, i.e. charity is a significant obligation for Muslims, who, in accordance with the Ku’ran, are to give something periodically to the needy. Really, Islam tends to the benefit of the community by putting into practice
the Zakat (”charity to the poor”) process. Nevertheless it is possible to own one’s wealth, but one must manage it wisely.

Such a vision has a double aim: on one hand it targets at guaranteeing the community acceptable levels of life (thus fighting poverty) whereas, on the other hand, it dedidedly intends to avoid the excessive stockpiling of wealth in the hands of a few individuals.

In addition, a number of precise technical examples of Islamic Banking’s regulations and their essential difference in comparison with capitalism will be discussed in the following post.

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