Commodidex

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{{tag>finance}}

====== Islamic Finance ======

~~NOTOC~~ 

The key difference between conventional and Islamic financing is that, while the time value of money is not permissible in a pure 'cash now for more cash later' transaction, it is <wrap hi>allowed if the financing is an integral part of a real trade in goods</wrap>.

So while the organisation is <wrap hi>not allowed to lend USD 100,000 in cash now in return for USD 110,000 payable in a year</wrap>, it is <wrap hi>allowed to sell an asset with a market price of USD 100,000 for USD 110,000 payable in a year</wrap>. 

Therefore often described as an <wrap hi>asset-based financing system</wrap>.

==== Trade Finance ====

The <wrap hi>key Shariah Contracts used for trade financing are murabaha and salam</wrap>.

==== Prohibited Practices ====

  * Riba: Interest or usury((Wucher)), which is strictly prohibited in Islamic finance.
  * Gharar: Uncertainty or ambiguity in contracts, such as speculative transactions or contracts with unclear terms.
  * Maisir: Gambling or speculative transactions, where gains are based purely on chance.
  * Haram Investments: Investments in businesses involved in activities prohibited by Islamic law, such as alcohol, gambling, pork, and unethical industries.