Finance is described as Islamic when it complies with sharia, a set of moral laws laid out in the Qur'an and writings about the prophet. Sharia forbids making money from money. Islamic finance is all about sharing risk between financial institutions and the individuals that use them. To do that, the two parties are tied into a longer-term relationship with each other that is supposed to shift incentives and avoid cut and run financial deals.
So, for example, sharia-compliant mortgages mean that the bank and the borrower share the risks of repayment rather than charging any form of interest.
Since it's Islamic, that also means that financial trading is off-limits for things that are forbidden even if no interest is charged - so investments can't be made in alcohol, tobacco, non-halal meat products such as pork, or gambling companies.
At SF we have an in-depth knowledge of various Islamic products such as ** (Ijara, Murabaha, Takaful and Wadiah) and we advise clients on Islamic finance transactions across a number of practice areas, including capital markets, project finance, banking, derivatives and structured finance, funds and taxation.
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