Islamic Finance


Many of us have heard of traditional banking. But h0w many of us have actually heard of Islamic financial policies. Let’s take a interesting look at what is Islamic finance? The way it operates.  Just to let everyone know this information about Islamic finance is taken from All I am trying to do is spread the knowledge.


What is Islamic Finance?

The basis of Islamic Finance denounces usury, termed as riba (which is the lending of money at exorbitant rates) but it doesn’t stop just there. The concept is more accurately that money has no intrinsic value – it is only a measure of value, and since money has no value itself, there should be no charge for its use. Therefore, Islamic Finance is said to be asset based as opposed to currency based whereby an investment is structured on exchange or ownership of assets, and money is simply the payment mechanism to effect the transaction. The basic framework of an Islamic Financial System is based on elements of Shariah, which governs Islamic societies. Shariah, the law of Islam, originates from two principal sources: the Quran, the Holy Book of the Muslims and its practices; and the Sunnah , the way of life prescribed as normative in Islam, based on the teachings and practices of Prophet Muhammad (pbuh).

   When did Islamic Finance start being used?

 As mentioned, the basis of Islamic Finance is from the Shariah, so the concepts of Islamic Finance have been around since the origination of Islam itself. The practices of what we see today have been used throughout the last 1500 odd years across the modern Muslim world and beyond. The modern Islamic finance really originated in the 1960s, escalating with the petro-dollar boom of the 1970s when in 1975, the Islamic Development Bank was formed to promote acceptable financial practices according to Islam. While many banks originating in the Middle East strictly follow these principles, many also follow Western practices of finance, with a number following both practices to cater for both markets. Interestingly, many of the internationals larger banks (with HSBC, UBS and Citigroup as notable examples) all have Islamic banking arms, both in the Middle East and the West.


What are the main principles of Islamic Finance?

 The main principles of Islamic Finance include:                     

The prohibition or taking or receiving interest at exorbitant rates (Riba), but this does not preclude a rate of return on investment which is agreed up front by both parties contracting. In most cases, the references to interest rates by Islamic financial institutions are to help benchmark the return on investment to offer transparency. This does not imply interest is being used in the transaction.

 Risk in any transaction must be shared between at least two parties so that the provider of capital and the entrepreneur share the business risk in return for a share in profit.

 The prohibition of speculative behaviour (Gharar), meaning that gambling (Maysir) and extreme uncertainty or risk is prohibited and thus contractual obligations and disclosure


Innovation …. World awaits

Leaders of the G20 pose for photos at the G20 ...

Leaders of the G20 pose for photos at the G20 Summit on Financial Markets and the World Economy in Washington, D.C. on November 15, 2008. (Photo credit: Wikipedia)


“Dreamers are mocked as impractical. The truth is they are the most practical, as their innovations lead to progress and a better way of life for all of us.”
― Robin S. Sharma

As always i am back with something new and for a change a buzz word called innovation. Now we have been hearing this word tons of times in our lives . There have been products which have made our lives easy . There have been services that have been innovative so much that we these days order even glossaries online.  So whats the problem . Why is the current world economy is in so distress ?  I am looking for an answer and the answer lies within our pasts.

Lets take a classic example , the crisis of financial markets in 2007 . Now the reason i am talking about these crisis for the very reason that it impacted not only american economy but the world economy. Collateral debt obligations. If we take a look at the whole process it would sounds so funny that at each step of these CDO’s being sold , it lacked regulations.  Many of the economists had suggested the after effects of this , but it seems that there was a element of overconfidence and lack of risk management which led to the fall of many financial which the world has witnessed.  The government printing dollars , pumping cash into the markets but how long u can keep printing dollars. We had millions of people across the globes loosing their jobs , houses , many of them have to sell newspapers , what an agony.

The world is awaiting some thing and that’s what we call innovation. Now the million dollar question is how do we bring innovation in banking or financial institution ?  Recently i had read an article on social banking which i had posted on my blog. I am not sure how many banks or institution have implemented this concept but i think it will be a wave of changes in the world economy . My take is we should have a networking platform for investors may be online. Some thing that would already exist but not been taken seriously . The benefit of having a social networking platform for investors would be , they will have clear ,concise and correct visibility to markets as they will be able to interact with each other.  We can have even a platform for venture capitals online which if made global would not only boost economy but generate loads of revenue. Think about it. It is just an idea i am trying to suggest .  Comments welcome .

People will comment on it saying its impractical . But impractical is a word ” I M PRACTICAL ”

Looking forward for replies..

This is Shwetal Signing off for now …. Asta la vista..

Shwetal – An aspiring writer.

I love being a writer. What I can’t stand is the paperwork.

Peter De Vries


Worlds most important financial institution


The real truth of the matter is,as you and I know, that a financial
element in the large centers has owned the government ever since
the days of Andrew Jackson…

Franklin D. Roosevelt

Years and years have passed and we have learnt a lot in this financial industry. We have some financial institution  that are important for the health of financial industry. Forbes has published the list of most important banks in the world . Please see the list below.

Bank Of America
Bank of New York  MELLON
JO Morgan Chase and co.
Morgan Stanley
State Street Bank
Wells Fargo
Lloyds Bank
The Royal Bank of Scotland
Credit Agricole
Societe Generale
BNP Paribas
Banque Populaire
Deutcsche Bank
Commerz Bank
Credit Suisse
Mitsuishi UFJ , Bank of Tokyo
Mizuho financial group
Sumitomo Mitsui Banking Corp
Bank of China

I try to leave out the parts that people skip.

Elmore Leonard                                                 


This is Shwetal Signing off for now.. Asta la Vista… Hope to see some likes on this stats 🙂


Social Banks and the Future of Sustainable Finance

Just to let every one know that the source of this information is world financial review by Olef Weber and Sven Semer.

What is social banking?

The term ‘social banking’ is used in a very heterogeneous way. First, since recently, the term social banking (2.0) is increasingly used to refer to banking based on new ‘social’ media, such as the Internet and related software. In this context, the ‘social’ part mainly comprises of establishing a direct connection between lenders and borrowers – without necessarily aiming for a social impact. Second, particularly in developing countries, social banking is often understood as (subsidised) government or development banking. Third, and usually also with respect to developing countries, social banking is very commonly associated with microfinance or microcredit. Fourth, the term is used for banks that mainly or exclusively serve socially oriented or charitable clients. Finally, especially in the Northern hemisphere, the term social banking is used for banks that strive for only doing business with a “positive impact”. In this sense, ‘social banking’ often is used interchangeably with ‘sustainable’, ‘ethical’ or ‘alternative’ banking.

“We define social banking as banking that aims to have a positive impact on people and the environment by means of banking.”


How did social banks develop?

Contemporary social banking stands in the tradition of two early predecessors. On the one hand, these were the ‘Montes di Pietá’, an early type of social bank initiated by religious orders of the Dominicans and Franciscans in 15th century Italy to provide credit to the poor and combat usury. On the other hand, these were the savings and cooperative banks that developed in the 18th century, first in Germany and Austria. These banks were founded to serve clients who did not have access to basic banking services such as credit or saving facilities. They also had a strong focus on supporting the local community and economy.

Social banking today largely builds upon the philosophy of these banks that, in their respective times, were able to create a cultural change in the financial business, away from usury-driven money-lending towards mutually beneficial financial intermediation between depositors and borrowers.

Products and Services of Social Banks


Lot more to share but in next post … Asta la Vista …. This is Shwetal Sigining off  for now.

Shwetal – An Aspiring writer…

The best style is the style you don’t notice.

Somerset Maugham