Investing In Islamic Funds: A Practitioner's Perspective

CHAPTER 3

Uncovering the Driving Principles of Islamic Finance

A Journey to Accumulate Wealth Responsibly

Saiful Azhar Rosly and Noripah Kamso

O ye who believe! Squander not your wealth among yourselves in vanity, except it be a trade by mutual consent.

(An Nisa: 29)4

And O my people, give full measure and weight in justice and do not deprive the people of their due and do not commit abuse on the earth, spreading corruption.

(Hud: 85)4

INTRODUCTION

On March 4, 2009, it was reported that the Vatican said banks should look at the rules of Islamic finance to restore confidence amongst their clients at a time of global economic crisis. The Vatican’s official newspaper, Osservatore Romano, said, “The ethical principles on which Islamic finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service.”1 The Osservatore’s editor, Giovanni Maria Vian, said, “The great religions have always had a common attention to the human dimension of the economy.”2

Islam postulates a unique nexus of contracts among the Creator, people, and society on the basis of the Divine law that directly affects the working of the various social, political, economic, and financial systems. Therefore, to understand the way in which economic affairs and capital market players are to be organized in an Islamic system, it is first necessary to comprehend the nature of this relationship.

What differentiates Islamic finance from other systems of thought is its ...