Riba

Pristine Islamic Financing

Hussein Babsail

Merrimack College

Abstract

Islamic financing is the modern, alternative way to purge the use of usury within Muslim communities. The introduction of the system was started with the use of the pristine teaching of Islam. However, several modifications to the Islamic banking system arose due to the effects of globalization and the impulses of big investors to maintain money more securely. The change to Islamic banking, in parallel with the conventional banking system, became a debatable topic among Muslims, as well as to interested non-Islamic communities. The ethical and moral practice of business should accommodate the Islamic banking system to follow what the majority of Muslim communities believe is the right way to employ their financing. This paper tries to shed light on both Islamic and modified Islamic systems and discuss the role of ethics and morality in maintaining pristine Islamic finances.

Pristine Islamic Financing

For the past 4,000 years, usury has been criticized by religious people and by some other sectors within societies that have considered it harmful to individuals. Vedic India, Judaism, Roman Catholicism, and Islam all have prohibited usury (Reed & Bekar, 2003). Islam has distinguished between trading and usury; hence, the conventional banking system is based on usury when compared to Islamic banking, which has as its main concept the elimination of usury (Daly & Frikha, 2015). The word riba is used interchangeably with the word usury in this paper, although there is a subtle difference in the meaning between the two words, as will be explained later.

Riba is a hot topic in Islamic countries, where many Muslims want to invest their money according to Islamic commandments. Islamic financing starting to emerge, however, when a lack of governance and integrity ended up corrupting most of the Islamic banking and financing products. Several modifications took place in Islamic banking...