Chapter 10

Islamic Influence

Abstract

Islamic finance is based on Islamic principles and jurisprudence. The payment and receipt of interest (riba) is prohibited under Islamic principles. Contracts that involve speculation (maysir) and uncertainty (gharar) are considered void in Islamic finance. Financing instruments in Islamic finance consist of equity-like and debt-like instruments. Fixed claim instruments include murabaha, ijarah, salam, and istisna. Sukuk is an asset-backed trust certificate (bond) representing ownership of an asset or its usufruct (earnings) based on the principle of sharia. Equity instruments include mudarabah and musharakah. In mudarabah one partner provides the capital investment (rabb ul maal) to another partner (mudarib ...

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