If you’re looking for a sharia-compliant loan, you may have heard that it’s difficult to get approved or that the interest rates are very high. Neither of these things are true! Whether you’re buying a home, starting a business, or paying for your kids’ education, there are many good reasons to take out one of these loans. Here are 3 facts about Shariah Adviser that you need to know.
1) The definition of Sharia banking
Sharia banking is a system of banking or financial services based on the principles of Islamic law (Sharia). Sharia-compliant banking products are designed to avoid interest, which is prohibited under Sharia law. Instead of charging interest, Sharia banks make money by sharing profits and losses with their customers. It also means they don't provide any financial service for what has been deemed unethical investments.
While there are many benefits for those who practice Islam, this type of banking may not be appropriate for everyone. For example, it doesn't allow for fixed rates. It's also worth noting that these practices can be more expensive in some cases because there's no ability to charge interest and profit margins are smaller than typical investments.
2) Why banks are turning to Sharia?
Banks are increasingly turning to Sharia-compliant products and services to meet the needs of their Muslim customers. Here are things you need to know about Sharia-compliant banking
They can't invest in businesses like alcohol, gambling, pornography, tobacco or pork production
A sizeable minority of Muslims use them because they are unable to invest in traditional banks because they have difficulty meeting the necessary conditions for a conventional loan.
They generally have lower interest rates on savings accounts than traditional banks do.
Sharia-compliant investments are called Takaful, which is based on social solidarity between participants.
Islamic insurance products also exist and may be offered by your bank as an alternative to traditional life insurance policies.
3) What is Sharia financing?
Sharia financing is a type of Islamic banking that follows the principles of Sharia, or Islamic law. This means that Sharia-compliant banks cannot charge interest on loans, as this is considered usury and is forbidden under Sharia. Instead, these banks typically use a system of murabahah, or cost-plus financing, in which the bank and the borrower agree on a purchase price for an item and the borrower then pays the bank back over time with interest. While more complicated than other types of financing, there are many benefits to this system, including low risk and no interest payments!
Conclusion
Sharia-compliant banking is a rapidly growing industry, with assets estimated at over $2 trillion. And while there are many misconceptions about sharia-compliant finance, the reality is that it can be a great option for those looking for an alternative to traditional banking. What's more, as we'll explore in this post, some of these misconceptions might have been perpetuated by media reporting on negative incidents involving Islamic banks. What should I do if I'm considering opening a sharia-compliant account? Talk to your local banker or broker and get all of your questions answered first before deciding what sharia bank loans will be best for you and your family.
Source: 3 facts about sharia bank loans that you need to know
