Islamic finances If youre Muslim and are concerned about financial products that comply
Islamic finances
If youre Muslim and are concerned about financial products that comply
with Sharia Law, there are more and more optio available to you
today. The first Islamic bank in the UK, the Islamic Bank of Britain,
opened its headquarters in Birmingham in 2004, offering a range of
products and services such as pe io , mortgages and loa .
The main requirement for financial products and services under Sharia
Law is that they neither charge interest nor pay it out, as making
money from money is co idered usury, and that they do not invest in
companies that are deemed unethical, such as those co ected with
alcohol, tobacco, pornography or gambling.
What often ha e when providing loa is that the bank will purchase
an item for the customer at a set price and rent it or sell it to them,
with repayments made in i talments. The bank makes its money by
levying a charge on the customers payments.
With investments, Islamic finance works on the basis of sharing the
risk as well as the reward. Both the customer and the bank agree on
terms for sharing the risk of any investment and lit any profits
equally between them.
The four main modes of Islamic banking are known as murabaha, where a
purchase is made by the bank and re-sold to the customer without any
interest payment musharaka, a partnership in which the rewards and
risks i.e. the profits and lo es are shared by both the bank and
the customer in an investment; mudaraba, where someone places their
investment in the hands of an expert who invests for them and shares
the profit but doe t bear the risk of any lo e and ijarah, a
rental agreement made in order for the customer to obtain goods, in
which rental payments are made over a ecified period and the bank
reclaims the goods at the end of it.
Many of the high street banks offer Islamic products, and there are
some Middle Eastern banks with branches in the UK that provide
financial products and services suitable for muslims.
Trust funds
The government introduced child trust funds in 2005 to help new parents
to start saving for their childs future. Upon the birth of a child,
they are given ound;250 in vouchers to invest on their behalf, and an
additional ound;250 on the childs seventh birthday. Additional
contributio of up to ound;1,200 can be made a ually, and the money
can be invested in savings accounts or in stocks and shares, or a
combination of both (a stakeholder account).
A Sharia-compliant child trust fund is also available for the children
of Muslim families, and is provided by the Childre Mutual. Its a
stakeholder account, which invests in the stock market until the child
tur 13 and then tra fers the funds into a savings account or lower
risk investments such as government bonds. This aims to reduce the
impact of any stock market slum in the run-up to their 18th birthday.
All investments are made in funds that dont compromise Islamic
principles, and no interest is paid on the savings.
Mortgages
As mortgages are interest-charging loa , they are not co idered
acceptable to the Islamic faith. However, as most people cant afford
to pay cash to buy a property outright, there is a demand for Sharia-compliant mortgages
among the Muslim community. Many high street banks now offer such
products, as does the Islamic Bank of Britain. An Islamic mortgage
normally works by mea of ijara, a leasing agreement in which the bank
purchases the property on behalf of the customer and charges rent to
them (including a handling fee) until the purchase price is repaid, at
which point the customer ow the property outright. As with other
mortgages, the bank retai the rights to the property until this point.
Bank accounts
To comply with the Islamic faith, bank accounts should neither charge
nor pay interest. This normally mea that there will be no overdraft
or credit card facilities on current accounts, and that savings
accounts invest money to make a profit rather than receive interest on
it.
Pe ion schemes
A few financial organisatio now offer Islamic pe ion schemes,
allowing Muslims to invest for their retirement without having to
compromise their beliefs. Such schemes invest only in funds co idered
to be ethical under Sharia Law i.e. no investment in companies
involved in alcohol, tobacco, betting or pornography, or any companies
such as banks that profit from charging interest. If any dividends
arise as a result of busine involvement in any of these areas, the
money is purified by giving it to charity rather than awarding it to
those investing in the scheme.
The article is refered from http://www.bbcok.com, http://www.worldloanpro.com, please go to read more.
If youre Muslim and are concerned about financial products that comply
with Sharia Law, there are more and more optio available to you
today. The first Islamic bank in the UK, the Islamic Bank of Britain,
opened its headquarters in Birmingham in 2004, offering a range of
products and services such as pe io , mortgages and loa .
The main requirement for financial products and services under Sharia
Law is that they neither charge interest nor pay it out, as making
money from money is co idered usury, and that they do not invest in
companies that are deemed unethical, such as those co ected with
alcohol, tobacco, pornography or gambling.
What often ha e when providing loa is that the bank will purchase
an item for the customer at a set price and rent it or sell it to them,
with repayments made in i talments. The bank makes its money by
levying a charge on the customers payments.
With investments, Islamic finance works on the basis of sharing the
risk as well as the reward. Both the customer and the bank agree on
terms for sharing the risk of any investment and lit any profits
equally between them.
The four main modes of Islamic banking are known as murabaha, where a
purchase is made by the bank and re-sold to the customer without any
interest payment musharaka, a partnership in which the rewards and
risks i.e. the profits and lo es are shared by both the bank and
the customer in an investment; mudaraba, where someone places their
investment in the hands of an expert who invests for them and shares
the profit but doe t bear the risk of any lo e and ijarah, a
rental agreement made in order for the customer to obtain goods, in
which rental payments are made over a ecified period and the bank
reclaims the goods at the end of it.
Many of the high street banks offer Islamic products, and there are
some Middle Eastern banks with branches in the UK that provide
financial products and services suitable for muslims.
Trust funds
The government introduced child trust funds in 2005 to help new parents
to start saving for their childs future. Upon the birth of a child,
they are given ound;250 in vouchers to invest on their behalf, and an
additional ound;250 on the childs seventh birthday. Additional
contributio of up to ound;1,200 can be made a ually, and the money
can be invested in savings accounts or in stocks and shares, or a
combination of both (a stakeholder account).
A Sharia-compliant child trust fund is also available for the children
of Muslim families, and is provided by the Childre Mutual. Its a
stakeholder account, which invests in the stock market until the child
tur 13 and then tra fers the funds into a savings account or lower
risk investments such as government bonds. This aims to reduce the
impact of any stock market slum in the run-up to their 18th birthday.
All investments are made in funds that dont compromise Islamic
principles, and no interest is paid on the savings.
Mortgages
As mortgages are interest-charging loa , they are not co idered
acceptable to the Islamic faith. However, as most people cant afford
to pay cash to buy a property outright, there is a demand for Sharia-compliant mortgages
among the Muslim community. Many high street banks now offer such
products, as does the Islamic Bank of Britain. An Islamic mortgage
normally works by mea of ijara, a leasing agreement in which the bank
purchases the property on behalf of the customer and charges rent to
them (including a handling fee) until the purchase price is repaid, at
which point the customer ow the property outright. As with other
mortgages, the bank retai the rights to the property until this point.
Bank accounts
To comply with the Islamic faith, bank accounts should neither charge
nor pay interest. This normally mea that there will be no overdraft
or credit card facilities on current accounts, and that savings
accounts invest money to make a profit rather than receive interest on
it.
Pe ion schemes
A few financial organisatio now offer Islamic pe ion schemes,
allowing Muslims to invest for their retirement without having to
compromise their beliefs. Such schemes invest only in funds co idered
to be ethical under Sharia Law i.e. no investment in companies
involved in alcohol, tobacco, betting or pornography, or any companies
such as banks that profit from charging interest. If any dividends
arise as a result of busine involvement in any of these areas, the
money is purified by giving it to charity rather than awarding it to
those investing in the scheme.
The article is refered from http://www.bbcok.com, http://www.worldloanpro.com, please go to read more.
