AN ANALYSIS OF THE APPLICATION OF THE RULES AGAINST RIBA IN ISLAMIC BANKING AND FINANCE

The emergence of Islamic banking and finance in the Muslim world has remained the most inspiring and outstanding financial and economic phenomenon of the 21st century. Basically, Islamic banking and finance refers to banking and financial activities that are based on the principles of Islamic Law, which fundamentally prohibits the charging of interest. It is a finance activity that is consistent with the principles of Islamic Law which provides guidance that include coverage of a Muslim’s economic activity, such as dealing in property as well as creation and distribution of wealth. The Islamic Law explains in detail ethical concepts applicable in the use of money and capital, the relationship between risk and profit, and the social responsibilities of financial institutions.’ The basic tenets and principles of Islamic banking and finance are built upon the avoidance of Riba, Gharar (uncertainty) and the prohibition of impermissible businesses as stated in the Holy Quran and the Sunnah. Banking models are built upon the foundation of compliance with the principles of the Islamic Law. Riba is generally the same concept of interest or usury in Judeo- Christianity and is therefore unlawful and forbidden in Islamic law.