
In order to dispel the notion that the only reason for the existence of Islamic finance is to satisfy the religious obligations of the Muslims of the world. However, this is far from the truth considering there is a lot more to it than meets the eye.
No wonder you should go out of you and examine what is expected of you before leveraging Islamic finance to your advantage. In this quick guide, we take a look at significant ways in which adhering to Islamic principles has the potential to offer strong financial advantages.
Lowers Economic Inequality
It is worth noting that conventional financial markets are designed to precisely benefit the rich. Things tend to be different with Islamic markets considering they promote wealth and risk sharing. Keep in mind Islamic doesn’t prohibit wealth accumulation. Rather, it raises awareness and responsibility for the poor.
If this is not enough, Islamic financial products promote altruism, economic activity, and social responsibility. Those who are in dire need of money share risk and profits with those who supply money. In short, Islamic principles in financial markets can benefit all income levels.
Linking Savings and Investment
The very moment you put your paycheck in a bank savings account, the bank promises to keep it safe and pay your interest. Things tend to be different with Islamic finance since any savings account is an investment vehicle. An Islamic bank never guarantees a return on savings.
For this reason, you know when you sign the contract with the bank that it plans to actively invest your money to earn profit that it will eventually share with you. It is worth noting that Islamic investment vehicles showcase the concept of connection financial markets to real economic activity.
When taking it upon yourself to save money in the Islamic finance system, you don’t isolate it from economic activity as is the case with a conventional savings account does. Moreover, you don’t get a guaranteed return in an Islamic account, but as long as your bank undertakes its responsibility perfectly, you benefit from profits from transactions support economic transactions in real world.