Islamic Banking and the Financial Crisis Essay Example | Topics and Well Written Essays - 3000 words

Moslem Banking and the Financial Crisis - Essay suitThe following verses of the Quran illustrate Islamic prohibitions on riba or usury And for practicing usury, which was forbidden, and for consuming the peoples money illicitly, We have prepared for the disbelievers among them painful retribution. Al-Nisa 4161 Those who charge usury are in the aforementioned(prenominal) position as those controlled by the devils influence. This is because they claim that usury is the same as commerce. However, divinity fudge permits commerce and prohibits usury. Al-Baqarah 2275 The usury that is practiced to increase some peoples wealth does non gain anything at God. ... Background and Key Concepts of Islamic Banking Holden (2007) states that riba was a pre-Islamic practice that required that when a borrower could non repay a loan owed to another by a specified date, the amount of the loan change magnitude in lieu of an extension in the repayment date. However, such an arrangement presented a problem because borrowers who could not repay a loan were in danger of owing huge sums in perpetuity to lenders. Thus, those that rancid to moneylenders in an informal barter economy of the pre-Islamic era at times of famine, disasters or crop loser were in danger of entrapment in a vicious cycle of debt instrument, poverty and deprivation that could result in perpetual slavery for those that could not repay their loans. High risks associated with entrapment in a vicious cycle of indebtedness did not encourage risk-taking in commerce, and this was not beneficial for the society. It is important to note that the design of a extra liability company in the United Kingdom had evolved due to a societal need for managing ameliorate business risks for the betterment of the society and Islamic response for risk management related to the removal of the concept of riba from society. Holden (2007) goes further to suggest that the Quran prohibits profiting from idle money, and a prohibiti on exists for the practice of riba in Islam. In addition, Islamic law or the Shariah prohibits transactions that carry substantial risk or uncertainty at the time of inception, such as gambling or other forms of risk that present a latent for exploitation. Prohibition under the Shariah also extends to transactions that involve immorality,