Faith-based giving

Islamic finance was designed at the birth of Islam to balance the wealth in society and to stop economic exploitation. Also known as shariah-compliant finance and economics, the extensive, sophisticated system only exists in Islam.

Islamic finance aims to improve social justice through wealth redistribution and fair financial dealings.

Focused on achieving common good, Islamic social finance bans exploitative practices like:

1.financial speculation, known in Arabic as maysir (investing at great risk in the hope that it will gain value)
2.interest, riba (mainly selling money but also goods at a higher price than their worth)
3.contractual ambiguity, gharar (financial deals with small print that could mean weaker parties are exploited).

Zakat is a cornerstone of Islamic social finance. A tax on wealth and income, zakat (Arabic: azkāt, “that which purifies”) is a type of obligatory alms-giving.

It is not a charitable donation but the duty of each Muslim who meets the necessary criteria of surplus wealth. Muslims believe that paying zakat purifies, increases and blesses the remainder of their wealth.

Zakat is based on the value of a person’s disposable wealth owned for the period of a full Islamic (lunar) year. It must be paid if the minimum amount, known as nisab, is reached.

Visit our zakat pages to learn more, including how to calculate zakat and who can benefit from it.

Sadaqah is Arabic for charity. In the modern context, this means voluntary charity, given in addition to obligatory alms-giving, zakat.

Qard hassan is a loan extended on a goodwill basis, mainly for welfare purposes.

The borrower need only pay back the amount they borrowed, with no interest. On principle, Islam does not allow interest.

Should a borrower encounter difficulty, the lender must extend the repayment time. They can voluntarily waive repayment of part of the loan, or all of it.

Mutual insurance systems such as takaful have existed in the Islamic world for centuries.

Conventional insurance relies on interest-based investments – which are forbidden in Islam – and is entirely rooted in un-Islamic, speculative investments. The insurance provider gambles on receiving more income from the premiums, the payments it receives, than it has to pay out.

Takaful does not aim to make a profit – its purpose is to ease the risk faced by contributors.