Islamic finance

Economics and faith might have seemed irreconcilable, but they are increasingly converging. Islamic finance is not necessarily about a particular faith - it is an approach to financial transactions. The two key principles of Islamic finance are - bar against interest, and contracts based on uncertainty. Both have a definitive basis.

The bar on interest-bearing financial contracts is easy to understand as in medieval world, interest was a tool of social exploitation. Islam is based on brotherhood: one cannot possibly be charging interest from one's brother. But then, Islamic would permit and encourage profit-sharing.

The second key principle against contracts based on uncertainty is premised in the undesirability of gambling, another social vice.

Several forms of Islamic products have developed over time - many of them are only cosmetically dressed up as Islamic products, and beneath the surface, are no different from traditional financial products. However, it is interesting to see a new dimension to the economics of faith.

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