SHARIA BANKING

ISLAMIC LOAN WITHOUT INTEREST

HALAL LOAN WITHOUT INTEREST WITHOUT RIBA

An Islamic loan without interest is by definition a financing facility granted through an Islamic bank or a halal financial institution in favor of a Muslim money borrower who doesn’t want to pay any interest or Riba.

An Islamic loan without interest aims to follow the Islamic Finance principals which don’t allow the utilization of interest within any Islamic financial transaction which is based on the Sharia fundamentals.

A halal loan without interest means that the Islamic lender will not charge any interest like conventional financing would do, however Islamic banks have of course a business model like conventional banks and will therefore let pay Muslim borrowers using Sharia compliant tariffs.

An Islamic loan without interest doesn’t mean as suggested by antagonists of Islamic finance that just the wording is changing by replacing the word interest through fees, it is more than that.

An Islamic loan without interest means also that while conventional banks are looking at making profit through inflated interest payments and leaving the borrower responsible for any risk, an Islamic loan allows for the sharing of profit and loss and risk involved in fair manner.

Islamic finance without paying interest is reflected on the way how Islamic banks are acting for example with an Ijara (equivalent to leasing) scheme the halal bank makes money by charging the customer rent and no interest; also with a Murabaha or loan, a price is agreed in advance and is higher than the market value of the underlining asset.