Understanding Islamic Banking

What are the key principles of Islamic finance?

• Guaranteed high returns on all investments

• Prohibition of Riba, Gharar, and Maysir; risk-sharing; asset-backed financing; ethical investments.

• Complete freedom from any ethical considerations

• Mandatory interest-based lending practices

Why is riba prohibited in Islamic banking?

• Riba is encouraged to promote economic growth.

• Riba is a form of charity in Islamic finance.

• Riba is prohibited in Islamic banking because it is exploitative and leads to inequality.

• Riba is necessary for ensuring financial stability.

How does takaful promote risk sharing among participants?

• Takaful eliminates all risks by providing guaranteed returns to participants.

• Takaful relies solely on individual contributions without any collective fund.

• Takaful promotes risk sharing by pooling contributions to create a collective fund for mutual support.

• Takaful promotes risk sharing by distributing profits to shareholders only.

What is the concept of murabaha in Islamic finance?

• Murabaha is a loan agreement with high interest rates.

• Murabaha is a sales contract in Islamic finance where the seller discloses the cost and profit margin, allowing the buyer to purchase an asset without interest.

• Murabaha is a type of Islamic charity donation.

• Murabaha is a form of investment in stocks without any disclosure.

What are the main regulations governing Islamic banking?

• Mandatory fixed interest rates for all loans

• Encouraging speculative investments in the stock market

• Permitting the use of riba in transactions

• The main regulations governing Islamic banking include the prohibition of riba (interest), profit and loss sharing, avoidance of gharar (excessive uncertainty), and ethical investment requirements.