Islamic finances is defined as provision of services based on financial instruments and products of banks, non-banking sector and capital markets that are compliant with Shari’ah requirements.
In general, the Islamic financial system is a financial system, which does not allow charging interest (considered usury under Shari’ah).
The principles of Islamic finance are based on trust, integrity, fairness, clarity and transparency between parties to commercial transactions. This model emphasizes the ethics of economic activity incompatible with corruption, concealment of income, tax avoidance and other acts of bad faith. Advantages of Islamic finances include sharing of risks between parties to a transaction, which ensures fulfillment of their obligations. Ban on the use of an interest mechanism and financial flows supported by real assets eliminate the possibility of speculative transactions.
And no confessional restrictions are applied to parties to commercial transactions.
In the previous 30 years such instruments were used by traditional Islamic countries of the Middle East and South East Asia, but today many non-Islamic countries choose to benefit from its opportunities. “Many such centres that have no majority Islamic population – including London, Hong Kong, Japan, Luxembourg – are actively developing Islamic finances. It is consistent with the principles of responsible investment”, points out AIFC Governor Kairat Kelimbetov.
It is also important that Islamic finances are rapidly becoming more and more standardized: there are international organizations, regulators and industry standards.