What is Islamic Finance and How to be Islamic Compliant with the Revolution of Blockchain Technology
Islamic financial products are available to regular savers, investors and homebuyers, but unlike standard deals they don’t charge interest.
What does “money” mean to Islamic finance and how does it work?
According to Islamic Finance, money itself has no value; it is just a tool of exchange. You are not allowed to make a profit by exchanging cash with another person. A Muslim is not allowed to benefit from lending money or receiving money from someone.
This means that earning interest (riba)is not allowed — whether you are an individual or a bank. To comply with these rules, interest is not paid on Islamic savings or current accounts, or charged on Islamic mortgages.
How do the Islamic Banks make money?
Banks can profit from the buying and selling of approved goods and services. The principal means of Islamic finance are based on trading, -trading activities involving risk- so that banks and financial institutions will trade in sharia-compliant investments with the money deposited by customers, sharing the risks and the profits between them.
Although they cannot charge interest, the banks can profit from helping customers to purchase a property, Islamic Bank makes money by charging the customer rent; with a special Islamic Finance scheme, a price is agreed at the outset which is more than the market value. This profit is deemed to be a reward for the risk that is assumed by the bank.
How to be Islamic Finance Compliant by Blockchain Technology?
In Islamic Law (Sharia), there should be no interest charged for a simple transaction where no product has been traded or value added. Therefore, Islamic Finance is based only on profit generated from real life business transactions. In keeping with these rules, each transaction also needs to be witnessed by at least two people. With its decentralized and transparent nature of Blockchain Technology, it guarantees that witnessing process.
Payment solutions working on Blockchain Technology are fully compliant with Islamic finance rules due to their transaction process witnessing.
Blockchain Transaction Flow of Payment Transaction
As the blockchain technology provides a decentralized and a transparent system, it turns the payment solutions into Islamic Finance Compliant services. With this future technology, it creates a new age of financial systems even working under Sharia Rules effectively.
In the future , we are going to see Islamic finance compliant payment solutions which are going to change the payment experience and shape the future of payment world with revolutionary Blockchain Era.
If you have any questions, don’t hesitate to contact me via Telegram;
or via my personal account;
MenaPay Business Development Director
burak.erdir@menapay.io
Telegram: Burak Erdir
Twitter: Burak Erdir , MenaPay
