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                                            Australian Finance & Banking Review; Vol. 4, No. 1; 2020  
                                                                               ISSN 2576-1196   E-ISSN 2576-120X 

           Published by Centre for Research on Islamic Banking & Finance and Business, USA 
 

        45 
 

Finance, Islamic Fiancé: Theoretical Analysis 
 

 
Mahbuba Zaman 

Independent Researcher 
 
Abstract 
The paper discusses the steps to be taken to strengthen the efficiency and transparency of the Board and management. 
Increasing shareholders and depositors to play a more important role in protecting their own interests. The article then 
describes some of the popular resources available to enhance the effectiveness and responsibility of the Board and the Executive. 
 
Keywords: Finance, Islamic Finance.   
 
1. Introduction  
Islamic finance means that debt creation by direct lending and borrowing from money or other financial assets is not permitted. 
The debts can only be created by selling or leasing real assets through leasing-based financing (such as murabaha, ijara, and 
sukuk). The assets rented or sold have to be real (construction, real estate or other physical infrastructure), and the transactions 
must be genuine (approved by government regulators as well as Shariah board religious experts) with full intent to give and take 
charge; the associated debt (risk) cannot be sold and transferred to another person. 

 
2. Theoretical Analysis 
Financial  services  that  meet  the  requirements  of  the  Shariah,  or  Islamic  law  are  called  Islamic  finance.  While designed 
to  meet  the  specific  religious requirements  of  Muslim  customers, Islamic  banking  is not restricted  to Muslims:  both  the  
financial  services  provider  and  the  customer  can  be  non-Muslim,  as  well  as  Muslim. Shariah-compliant financing (SCF) 
constitutes financial practices that conform to Islamic law. Major  principles of shariah law that are applicable to finance and 
that differ from conventional finance are: In  conventional  forms  of  finance,  a  distinction  is  made  between  acceptable  
interest  and  usurious  interest  (i.e., excessive rates of interest). In contrast, under Islamic law, any level of interest is considered 
to be usurious and is prohibited.  Some  question  how  lenders  can  profit  from  financial  transactions  under  Islamic  law.  
Take for instance, in a real estate setting; SCF takes the form of leasing, as opposed to loans. Instead of borrowing money, the 
bank obtains the property and leases it to the Shariah-compliant investor, who pays rent instead of interest. Ban on  

Uncertainty in contractual terms and conditions is not allowed, unless all of the terms and conditions  of  the risks  
are  clearly  understood  by  all  parties of  a  financial transaction. This condition may help eliminate most of the speculative 
transactions which involve gharar (excessive uncertainty).Parties involved in a financial transaction must share both the 
associated risks and profits. Earnings from profits or returns from assets are permitted, so long as the business risks are shared 
by the lender and the borrower.  
 

3. Conclusion 
This will help ensure that the seller (or lessor) also shares a part of the risks in order to be able to get a share of the returns. 
Once the seller (financier) acquires ownership and possession of the goods for sale or lease, he/she bears the risks. Investment  
in  industries  that  are  prohibited by  the Qur’an,  such  as  alcohol,  pornography,  gambling,  and  pork based products, are 
discouraged. Each financial transaction must be tied to a “tangible, identifiable underlying asset.”9The  debt  cannot  be  sold, 
and  thus  the  risk  associated  with  it  cannot  be  transferred  to  someone  else;  it  must  be  borne  by  the  creditor himself.  
According  to  this  condition  a  transaction  must  be  a  genuine  trade  transaction,  and  the  fact  that  the creditor cannot 
transfer the risk to someone else by selling off the debt, will also help eliminate speculative and derivative transactions, as well as 
prevent the debt from rising far above the size of the real economy 
 
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Hassan, M. S., Mizanuzzaman, M., & Islam, K. M. A. (2020). The Effects of Training to the Employee Performance and 
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http://www.themillenniumuniversity.edu.bd/journal/index.php/TMUJ/article/view/26
https://doi.org/10.46281/ijafr.v5i1.630
https://doi.org/10.46281/amfbr.v5i2.778
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https://doi.org/10.46281/aesr.v6i2.851
https://doi.org/10.46281/amfbr.v5i2.841
https://doi.org/10.46281/ijscgr.v3i2.838
https://doi.org/10.46281/ijibm.v4i2.840
https://doi.org/10.46281/aijmsr.v6i3.823
https://doi.org/10.46281/ijbmf.v4i2.785

