The Shariah Principle
Zorrow comments: "Even the Moslems have found a way around the Koran-they call it sommething else--but its debt."
The Nattering One muses... Muslims have Islamic Shariah principles. Shariah prohibits Riba (usury) which means NO interest. In place of interest they substitute risk sharing i.e. a bank that provides funding to a business will have an agreed share in the profit or loss generated from the debt provided.
Shariah prohibits Haramm (unlawful or impermissible) under conventional Islamic law. i.e. any business involved in pork, alcohol, tobacco, pornography, prostitution, gambling, weaponry and many forms of Western entertainment or advertising that are contrary to Muslim values.
This also includes business involved in interest payments, i.e. businesses that transfer risk and are deemed unjust, like insurance. Paying money for something, with no guarantee of benefit, involves high ambiguity and risk. One pays into the program, but may or may not need to receive compensation from the program, which could be considered a form of gambling. The insured always seems to lose while the insurance companies get richer and charge higher premiums. Which leads to something you should read regarding their insurance cooperative Takaful...
And this... gambling related businesses extends to most types of trading like shorting and derivatives which is prohibited. Hedgers are also speculators, one who does not know the future, who takes a certain risk and speculates over likely price movements. Here there is a fine line, derivatives often contain elements of gharar (risky or hazardous and prohibited) which clearly render them unacceptable in an Islamic legal framework for the reason that they lead to undue speculation, which is the practical equivalent of gambling. Even so, hedging, in the sense of risk management, is not prohibited outright because the management of risk may take many forms, from portfolio diversification to leveraging equity capital through Islamically acceptable leases.
The Nattering One muses... Muslims have Islamic Shariah principles. Shariah prohibits Riba (usury) which means NO interest. In place of interest they substitute risk sharing i.e. a bank that provides funding to a business will have an agreed share in the profit or loss generated from the debt provided.
Shariah prohibits Haramm (unlawful or impermissible) under conventional Islamic law. i.e. any business involved in pork, alcohol, tobacco, pornography, prostitution, gambling, weaponry and many forms of Western entertainment or advertising that are contrary to Muslim values.
This also includes business involved in interest payments, i.e. businesses that transfer risk and are deemed unjust, like insurance. Paying money for something, with no guarantee of benefit, involves high ambiguity and risk. One pays into the program, but may or may not need to receive compensation from the program, which could be considered a form of gambling. The insured always seems to lose while the insurance companies get richer and charge higher premiums. Which leads to something you should read regarding their insurance cooperative Takaful...
And this... gambling related businesses extends to most types of trading like shorting and derivatives which is prohibited. Hedgers are also speculators, one who does not know the future, who takes a certain risk and speculates over likely price movements. Here there is a fine line, derivatives often contain elements of gharar (risky or hazardous and prohibited) which clearly render them unacceptable in an Islamic legal framework for the reason that they lead to undue speculation, which is the practical equivalent of gambling. Even so, hedging, in the sense of risk management, is not prohibited outright because the management of risk may take many forms, from portfolio diversification to leveraging equity capital through Islamically acceptable leases.
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