We all know that the conventional banking system dominates the global finance industry. However, the Islamic banking system's countless benefits have continued to extend over the last decade.
Due to their exquisite benefits, the majority of international and local banks have paced into the Sharia-compliant financial market. They started to establish Islamic units and wings in their existing banks to preserve the Islamic beliefs and values of Muslims.
In this informative blog post, we'll discuss some of the most notable benefits that Muslims can reap from Islamic banking and finances.
Benefit #1 - Foster Financial Justice
Financial justice is the most significant principle and core of the Islamic model. Islamic banking maintains a balance for the overall loss or profit between the two major parties-the lender and the beneficiary-instead of throwing everything at the entrepreneur.
If an Islamic bank finances a project, its outcomes will be equally distributed among the two side parties. If any financier anticipates earning profits from a specific project, he/she must also agree to share a loss equally.
Benefit #2 - Ensure Prohibition of Interest
Islamic banking system strictly forbids the charging and paying of interest in any way, which is thought to be exploitative. For instance, in Islamic home financing, the bank and client can jointly purchase the real estate, with the condition that the client gradually purchase the bank's share over time.
As an Australian Muslim, if you want to take a home loan but are unsure about whether it is interest-free or not, then rest assured. You cannot only choose stability and integrity with Islamic home loans in Australia but also get interest-free loans for your home.
The stringent principals of Islamic loan-granting and Islamic banking systems proudly make it possible for Muslims all over the world.
Benefit #3 - Reinforce Financial Stability
In the realm of Islamic finance, Muslims can make investments more cautiously and also the decision-making process is executed thoroughly not like the conventional banking system. The firms that seems to be risky are normally kept away from the renowned financial institutes.
That's why during the Covid-19 pandemic and worldwide 2008 financial crises, the Islamic financial institutes stayed untouched or unreached. By carefully auditing and analysis, the Islamic financial institutes reduce the risk potential and ensure financial stability and integrity.
Benefit #4 - Encourage Entrepreneurship & Ensure Inflation Protection
Islamic banking and finances encourage entrepreneurship by providing exceptional profit-sharing investments. For instance, startups and small businesses can better secure funding without the stress of repeated interest-based repayments.
On the other hand, another perk of Islamic banking comes with unique products, including Ijarah (aka leasing), which provides ultimate protection against inflation. Based on the stipulations of an Ijarah agreement, the rental payments are associated with inflation rates, protecting the better preservation of money's value.
Benefit #5 - Help Make Ethical Investments
There's no doubt that Islamic banks only invest in ethical sectors, which exclude industries such as alcohol, gambling, pork products, and many others. This ethically responsible methodology makes sure that the investments contribute majorly to the society's betterment.
They enable business-oriented minds to make investment in sectors that help society to become the most convenient and all-inclusive source for every Muslim. Health innovations , sustainable packaging solutions, and others are some of the most notable examples of making ethical investments.
