Sunday, December 3

The Crucial Role of Islamic Banks in Muslim Communities

Economical Need

In today’s global economy, Islamic banking has emerged as a vital financial system that caters to the unique needs and values of Muslim communities around the world. Islamic banks, guided by principles derived from Islamic law (Shariah), offer an alternative approach to banking that aligns with the ethical and religious beliefs of Muslims.  

Shariah-Compliant Banking

Islamic banking operates under the principles of Shariah, which prohibits the payment or receipt of interest (riba) and restricts investments in activities deemed unethical or socially harmful. This fundamental distinction sets Islamic banks apart from conventional banks and makes them essential for Muslim communities seeking financial services that align with their religious values. By adhering to Shariah principles, Islamic banks ensure ethical and socially responsible financial practices, thereby building trust and confidence among their customers.

Absa’s Islamic banking is advised and guided by the independent Shari’ah Supervisory Board, a panel of experts in Shari’ah law and its application in economics.

Economic Development

Islamic banks play a crucial role in driving economic development within Muslim communities. By providing access to finance through Shariah-compliant products, they facilitate capital formation and investment in productive sectors. Islamic finance emphasizes risk-sharing (mudarabah) and asset-backed transactions (ijara and murabaha), encouraging real economic activity and discouraging speculative practices. This focus on tangible assets and risk-sharing enhances economic stability, fosters entrepreneurship, and supports sustainable growth within Muslim societies.

Common Question, what is the Difference In Islamic Banking?

Question: How is Islamic (Shari’ah) finance any different from normal commercial bank finance? In both types of finance, you pay more money than you initially borrowed. Is Islamic finance really halaal?

Answer: As far as conventional commercial banks are concerned; the bank earns money through giving loans on interest. As for Islamic banks, they do not earn wealth through providing interest-bearing loans, but rather purchase the commodity and thereafter sell it or lease it to the client at a higher price adding a profit. Hence, in the operation of both there is a principle difference, provided the Islamic concepts and principles are applied correctly.

Win up to R10,000 with Absa competition

ABSA is running a competition with Al Ansaar Radio. Giving you the chance to win up to R10,000 every day.
Enter by tagging Radio Al Ansaar and use the #AbsaIslamicDynamic tag.
You could win R5000 in a 12 month Absa Islamic Dynamic Deposit Account.
If your an Absa Rewards member, you can win the full R10,000.
Absa is an Authorised FSP. T&C apply.
Winners will be announced on the Afternoon Jam with Fahim Jamadar

Article written by: Muhammad Salaahuddin

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