bank loans Sharia are all the rage. No, not because of its amazing profits, but because of its ability to provide loans to people from all walks of life.
Banks are opening up around the world as more and more Muslim consumers want to take advantage of these loans that offer no interest rates or high fees.
But are they really saving you from your financial woes?
In this article, we'll discuss whether or not Sharia banking is right for you and how it can benefit your life financially.
Ijara, or leasing
In this mode of sharia bank loans, the bank buys an asset and leases it to the customer for a fixed period of time. The customer then makes lease payments to the bank that are usually lower than what they would have paid if they had purchased it themselves.
The customer benefits from having access to more funds than he/she could otherwise afford; the bank earns profit through interest charged on these loans as well as fees for brokering deals between lenders and borrowers in addition to collecting rent from leasing out properties or equipment (if applicable).
The parties involved in ijara include:
- Landlord
- Buyer/lessee
- Seller / lessor
Mudaraba and Musharaka, or partnerships
Mudaraba is a partnership where there is a profit share and a loss share. In this type of partnership, an investor lends money to another person who uses it for his business.
If the investment makes profits for both parties, then each party will get their respective shares from the profit.
But if the investment results in losses, then both parties will lose their investments equally as well.
In Musharaka, there is no risk of loss for any party involved in the transaction; rather both parties share profits from the invested amount according to their percentage of ownership in assets purchased using borrowed funds by another party who has used them for his needs (for example cars purchase vehicles).
Islamic money market mutual funds.
If you're looking for an alternative to fixed deposits, Islamic money market mutual funds are a good option. They're safe and secure, with high liquidity and steady returns.
Islamic money market mutual funds are a good investment option because they offer attractive returns on your investment within a short period of time. In fact, most Islamic money market mutual funds offer fixed returns within one year or less (some even give monthly payouts).
Typical yields for Islamic money market mutual funds are between 1% and 2%, but they can go up to as much as 4%. The longer you hold your investment, the higher the yield. For example, if you invest in an Islamic money market fund that offers a 1% annualized return, it means that every year you get back 1% of the amount invested.
Conclusion
All in all, sharia bank loans are a great way to save for your future. With the right combination of products, you can be protected from unexpected expenses, invest your savings in profitable ventures, and even secure loans without accruing interest on them.
