ISLAMIC SHARIAH IN FINANCING
What is Islamic Shariah Financing?
Shariah banking/financing is the process of ensuring that financial product of service complies with Islamic legal precepts and principals, either by its conforming to one degree or another or by not violating the same.
Islamic shariah compliant banking is a fast growing segment of the financial sector in Kenya. The banking industry has shown impressive growth rates although from a very low base. Currently, convectional banks in Kenya such as National Bank and Standard Chattered are already extending to Islamic Shariah through 'National Amanah' & 'Sadiq'.
The basic sources of shariah financing can be found in the Qur'an and hadith and sunnah of Prophet Mohammed(p.b.u.h) which can interpreted by jurists and interpreters of the Islamic law.
The shariah financing prohibits Riba (interest) which is a main feature of the Islamic law. It extends to areas such as retail, commercial and private sectors.
Islamic banking and finance is not different from convectional banking, only that the structures are based on the shariah principles. It is the difference that makes the auditing and supervision of Islamic finance different from convectional banking systems.
Shariah banking/financing is the process of ensuring that financial product of service complies with Islamic legal precepts and principals, either by its conforming to one degree or another or by not violating the same.
Islamic shariah compliant banking is a fast growing segment of the financial sector in Kenya. The banking industry has shown impressive growth rates although from a very low base. Currently, convectional banks in Kenya such as National Bank and Standard Chattered are already extending to Islamic Shariah through 'National Amanah' & 'Sadiq'.
The basic sources of shariah financing can be found in the Qur'an and hadith and sunnah of Prophet Mohammed(p.b.u.h) which can interpreted by jurists and interpreters of the Islamic law.
The shariah financing prohibits Riba (interest) which is a main feature of the Islamic law. It extends to areas such as retail, commercial and private sectors.
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| SIMPLE STRUCTURE OF ISLAMIC BANKING |
Shariah compliant institutions in Kenya are overseen by Shariah Supervisory Board (SSB) which plays a key role in the audit and governance frame work.
In the Islamic financing institution model, is an assets-backed type of financing where some of the things found in convectional financing are left out;
1.Maysir (Gambling)
This is discouraged in Islamic finance because of the gain is unlawful and cannot be classified as Rizq.
2.Riba (Interest)
In Islamic finance, Riba feature is highly shunned upon due to the fact that the sum earned is not in compliance with Islamic Shariah and sunnahs of Jurists.
3.Gharar (Uncertainty)
In finance uncertainty is the probabilities that cannot be implied to a set of circumstances that cannot be measured or quantified. This should not be confused with risk as risk can be quantified and it is measurable.
CONCLUSION.
Shariah financing seeks to amend the faults of convectional banking through religion and the Sunnah of the Pioneers of Islam. This type of trade ensures that one gets his money in an honest, clean and measurable way whereby it has no claim of any sort of the fore mentioned faults found in convectional financing.
For Muslims, the prescribed laws are good for their day to day trades and ensures both religious and financial profits.
[Article prepared by Said Omar]
Saidkimutai040@gmail.com
