Islamic Financing
What is Islamic Financing
Islamic Financing derives all its rules from Islamic Shariah Law and they fulfill the Maqasid al Shariah at the core i.e. wellbeing of the general public and honoring its interests. The main feature of Islamic Financing is the prohibition of Riba i.e: interest (excess) charged on lending money. According to Islamic Shariah Law, lending is a virtuous deed and should be done to please One God and to help fellow humans in need. Any excess amount charged or demanded on money is strictly prohibited as it is considered exploiting the misery of the borrower. In the Islamic Economic System, money can only be used as the medium of exchange and store of value. It cannot be used as a commodity and cannot be sold for profit (interest). This role of money is the most distinctive and non-distributable feature of Islamic Financing.
Islamic Financing In USA
Conventional financing system is almost two and a quarter centuries old. Capitalism and the industrial revolution popularized the conventional financing system and lending on exorbitant interest, though it is older than that. In the early 19th century many churches prohibited the use of interest-based capital and had served as the money lender to needy in the community through charities of devoted. Jews also had rabbi communities who helped needy Jews with money. Also, Christianity and Judaism believe in the well-being of humanity like Islam. These religions have still these centers to help their underprivileged devoted followers.
The financial crisis of 2008-2009 shook the conventional financing and financial industry with the fall of the mortgage industry and resulting credit crunch hitting the US economy hardest. That also provoked the debate on financing regulations and ethics in financing and finance. After the crisis, the need for ethical financing was felt more deeply. Ethical Investments in the real economy, for the real and physical-economic activities, were realized for the sustainability of the global economy and financial structure.
Islamic Financing in USA: Since the 1970s Islamic Financing is growing by leaps and bounds. As of 2019 Islamic Financing and Finance Industry combined has grown to almost $4 trillion. Islamic financing and finance have seen unprecedented growth though it is still only a fraction of conventional financing assets globally. Despite such low assets as compared to conventional financing, Islamic financing and finance are projected to grow unconventionally, because of its huge market of 1.6 billion Muslims. Apart from targeting Muslims, Islamic financing also targets and is open to other religions and communities.
Research indicates that Islamic financing and Shariah-compliant products have seen most of its growth in the US market after the financial crisis in 2008-2009. Islamic financing and institutions are growing by 20% annually in the US market which hints at the huge potential and need for these products. Only two decades ago there were only a few Islamic products in the US market. With the increase in the Muslim population in the US demand for Shariah-compliant products also increased. US relevant authorities are also weighing in the huge potential of Islamic Shariah-compliant products as European countries did.
At Najaah, we believe in the fair distribution of wealth and equal opportunities to generate profits for all and integrate this faith-based ethical financing practice into the core our daily personal and business financial routine.