Islamic Banks without Charging Interest

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Islamic Banks without Charging Interest

Posted By Henry Brown9     November 20, 2021    

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Profit Making Strategy of Islamic Banks without Charging Interest

Islamic banking implies that how individuals and business raise the capital with accordance to Sharia. it a type of investment which is permissible under Islamic law. Islamic finance began in 7th century but formalized slowly in late 1960s. In Islamic banking and finance, concept of risk sharing is basic. If you need Islamic finance, visit this website. https://ijarahfinance.com.au/islamic-finance/


Islamic law appraise money as an estimating tool for values. It does not consider money as an asset in itself. According to Sharia, one should not make money from money alone. This is the reason why receiving or paying interest to any form of loan or investment is prohibited. Islamic banks exist to fulfil the socio-economic aim of an Islamic community.


There are different types of home loans available in the market. Some being full conventional, and some being little less so. But taking home loans from any conventional type of bank involves receiving and paying of interest. As payment and acceptance of interest is strictly prohibited under Islamic law and considered haram, so to go together with Muslim faith, Muslim people need to find an alternative to it. Islamic bank home loan completes this requirement. These home loan banks provide financial assistance to the people with accordance to Islamic law. There are basically three different types of interest free mortgages:

  • Musharakah- in this form of home loan financing, there exists a co-ownership between financing company and home buyer.
  • Ijara- in this form, the one who is financing the property purchases it on the behalf of home buyer and then it rents to home buyer itself. To obtain the ownership of the property, the home buyer has to pay a portion of payment on every decided due period. Home is not registered until repayment is completed.
  • Murabaha- here, the buyer requests the bank to purchase the home on his behalf. And the bank and buyer agree on a contract that repayment will be done by adding cost and profit together.

To learn more about Islamic bank home loan, visit this website.

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