Islamic finance provides an alternative financial system rooted in Shari'ah principles, derived from the Qur’an and the Sunna. It emerged during the post-colonial era of the 1950s, when scholars in newly independent Muslim-majority countries sought to create an economic model distinct from both capitalism and socialism.

 

This model was envisioned as a “third way,” built on ethical and moral foundations, where faith-driven individuals prioritize collective well-being over mere profit maximization.

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At its core, Islamic finance prohibits interest (riba), excessive uncertainty (gharar), and investments in industries deemed unethical, such as alcohol, gambling, and weapons. Instead, it promotes risk-sharing, profit-and-loss arrangements, and investment in real economic activities. The overarching goal is to establish a financial system aligned with Islamic ethical values, one that fosters social justice, equity, and the overall welfare of the community.