Principles of Islamic banking and finance/PIBF201/Fixed income Islamic modes of finance/Video signpost
In this video, Dr. Shamim Siddiqui from Hamdan Bin Mohamed Smart University, provides an overview of Islamic modes of finance that can generate fixed incomes.
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Video transcript
By now you must have a good idea that the most fundamental element of Islamic banking and finance is the avoidance of interest. The avoidance of interest is the cornerstone of Islamic banking. In pre-Islamic Arabia, a number of modes of financial transactions were in use that did not involve riba. Their use continued both during the life of the Prophet and afterwards. Later on, the fuqha (Islamic jurists) permitted modified versions of the old permissible practices or newly suggested modes that they deemed acceptable meaning free from riba. In this section you will learn about the modes of finance that are debt-based but, according to the Islamic scholars, they are free from riba. They are: murabaha, bai bithamin aajil, ijarah and ijarah wal iqtinah. Money earned from these modes of Islamic financing or debt-based contracts—"must" come "from a tangible asset that one owns and thus has the right to sell— The main idea is that money cannot be made from money as "it is only a medium of exchange.
