Islamic finance

Islamic economic jurisprudence, also Islamic commercial jurisprudence, or fiqh al-mu’amalat, refers to the rules of financial transacting in a Shari’a compliant manner, or economic activity conforming to Islamic scripture (Quran and sunnah). Islamic jurisprudence (fiqh) has traditionally dealt with issues in terms of determining what is permissible or prohibited according to the scripture of Quran and ahadith, (whether dealing with issues like property, money, employment, taxes, etc. or anything else). On the other hand, economics being a social science studied how to best achieve certain policy goals, such as full employment, stability, economic growth, and improving efficiency, and equity. Since the 1970s, Islamic economics has been introduced as an academic discipline in a number of institutions of higher learning throughout the Muslim world and in the West. The central features of an Islamic economy are often summarized as: (1) the “behavioral norms and moral foundations” derived from the Quran and Sunnah; (2) collection of Zakat and other Islamic taxes, (3) prohibition of interest (riba) charged on loans. Islamic movements and authors generally describe an Islamic economic system as neither socialist nor capitalist, but as a “third way”, an ideal mean with none of the drawbacks of the other two systems. Among the claims made by Islamic activists and revivalists for an economic system that will be based on Islam are that the gap between the rich and the poor will be reduced and prosperity enhanced, by such means as the discouraging of the hoarding of wealth, taxing wealth (through zakat) but not trade, exposing lenders to risk through Profit sharing and venture capital, discouraging of hoarding of food for speculation, and other sinful activities such as unlawful confiscation of land. Some have categorized Islamic finance as a form of religious ethical finance, like Christian finance.