An Introduction To Islamic Finance

January 7, 2018

Islamic banking is identical to conventional banking, with the notable exception of a few principles. It isn’t as complicated as it sounds, and it’ll only take you five minutes, so let’s get reading!

Syariah compliant

It refers to all kinds of transactions that abide by Syariah law, as written in the Quran, Hadith, and Sunnah. This principle applies to all banking products and services, hence loans and investments are not permitted in areas that are forbidden within the religion. Islamic banking is not exclusive in nature and is in fact quite appealing to sectors of non-Muslim people who are aware of its benefits.


Islamic banking lies in the principle of risk-sharing, meaning that the bank will also share a portion of that risk instead of putting it solely on the shoulders of its customer. Any profits yield from investments will be distributed between the bank and its customer as per terms agreed.

If a customer borrows money to start a business from a conventional bank, he or she will still have to repay the interest-ridden principle debt even if it tanks. On the flip side, borrowing from an Islamic bank will provide some relief as the bank will share the burden if the business flops.


Islamic banks make its money by way of providing a service, and all financial dealings must be substantiated with assets. For example, instead of charging interest like conventional banks do, the Islamic bank purchases your product for you and sells it back to you at a higher price, thus justifying the service that it can charge its customer for. Another typical example would be that the bank purchases your home for you, and have you pay monthly for rent, which actually enables you to take ownership of it at the end of the day. For this reason, Islamic finance is a good and fair product to take up when it comes to making big commitments.


RHB Bank in Malaysia is giving some serious offer for Islamic Banking, learn more here: https://www.rhbgroup.com/products-and-services/personal/islamic/financing