What are the different types of Islamic financial institutions?

There is a wide range of Islamic financial institutions that provide services similar to those traditional financial groups. Such groups are able to function commercially and make profits, although technically, no interest does not change their hands. Banks and investment companies offer services such as personal loans and mortgages. Islamic companies exist even the facilities and markets of Islamic companies through the equivalent of bonds.

Islamic financial institutions face various limits on how they work. Most of them relate to the idea that RIBA - as a literal term, equivalent to increasing or excess of English words - is forbidden. As a concept means riba money without something equivalent. Specifically, this applies to financing because of Islamic interpretation that the creditor without his money for the period is not foreseen with the debtor as something that requires compensation. This means that basically Islamic financing of cane exploration of interest.

only in the 70s.discover Islamic financial institutions. Until this time, most of the financial measures were informal among the followers of Islam. Since the 1970s, institutions have appeared to follow the concepts of traditional leisure banking and follow Islamic principles.

There are many Islamic consumer banks that use different techniques to provide loans and mortgages without violating the principle without interest. It usually requires that the loan be associated with the purchase of a specific asset. One technique is for the bank to buy the asset itself and to hand it over to the customer, but to maintain legal ownership. The customer than buying an asset from the bank and paying in installments. The total price will be more than the original purchase price paid by the bank, but this additional money is legally considered to be a bank that has achieved more sales, rather than the difference is an interest fee.

Similarly, Islamic BA cannky to offer mortgages. This is technically achieved by a bank and customer buyer as a common owners, even if the bank delivers most of the money and therefore has a majority share. As with a traditional mortgage, the customer makes regular payments over time. These payments are not classified as interest or installments, but rather as a combination of rent to cover the exclusive right to life in real estate and installments to purchase the shareholding of the bank, until the customer finally takes over the full property of the property.

Another area involving Islamic financial institutions is the market for businesses issued by debt -based products and investors to trade in these products. This is done through Sukuk, equivalent to bonds, but without interest payments. The flow of money works back and forth in the same way, but from a legal point of view, Jacket sells a certificate to the Sukuk to the investor; The investor then rents the certificate back to the bank to create a flow of income equivalent to the interest of interest on bondSU; Finally, the issuing company buys a certificate for its nominal value.