Has Islamic banking outshone the principles of Islam?

With the growing popularity of the Islamic banking system, Islamic finance has been on the rise since the last few years. As the Islamic finance is escalating through the stairs of success, there is a question in everyone’ s minds, ‘ Has Islamic banking outshone the principles of Islam?’ Most people are using the Islamic financial instruments to treat their debts and doing something about their overwhelming amount of debt helps them boost their confidence over their finances. But what is the reason behind this sudden growth in the Shariah based economic system?

Assets in the Islamic banks in the most crucial Muslim market like United Arab Emirates and Saudi Arabia rose 32% from the year 2007 to 2009. The same percentage has risen 13% in the case of traditional banks in the same market conditions according to a report
produced by the IMF or the International Monetary Fund in the month of September, 2010. In the United States of America, more than twelve companies offer financial products in compliance with Shariah.

It is seen that there is no worldwide rule that governs the Islamic finance. Almost all financial practitioners accept that the charging of interest rate (riba) on any kind of loans is forbidden according to the Shariah law. The risk and reward in the lending procedure,
is not only expectant but also necessary. They believe that since Mohammed was a merchant, transactions should be in accordance with the real economy where there are no derivatives. The money that is lent to consumers should not be used for evil activities.

The venture capitalists have offered a good representation for Islamic finance as most of their transactions involved shared reward and risk. Similarly, Islamic banks use some of the trade forms of the venture capitalists. While financing a car, a traditional bank will
offer you high interest rates but Islamic banks use an agreement known as a Murabaha. In such a case, the bank will buy a car from the customer and sells it to him at a score with the payments collected in the form of installments. As these payments are spread over a period of time, this mark up looks much likes a couple of interest rates.

Islamic banking system rose in the middle of 1970s and since then it has been seen rising, fueled by the oil prices that left the Gulf States in abundance of cash. With the widespread of pan Islamism, the Muslims went to look for their own alternatives too conventional finance. Thus Islamic banks are gaining recognition for their benefits of the practices. The prohibition of leverage, restrains their growth, yet their balance sheet remains relatively strong. Debt helps a person understand the importance of investment.
Invest your money in the Islamic finance and eliminate your debt burden gradually.