When I meet, my non Muslim clients who are learning more about Islamic finance, sometimes they are curious, and they asked me, why Muslims cannot take interest. (riba)
Why, Muslims, cannot include speculative investments, like derivatives etc2, in their investment portfolio? (maysir)
I will normally answer, that God doesn’t allow us and stop at that. Today, I decide to blog about it.
Prohibition of interest and speculative activities are clearly mentioned in the Quran.
Allah S.W.T said in the glorious Quran, Surah Al Baqarah, Verse 275
“Allah has permitted trade and has forbidden interest”
Charging and earning interest is haram (forbidden) in Islam. Islamic finance advocates profit and risk sharing. If Islamic institutions lend out money, it becomes partners with the borrower in the venture. Profits and loss will be shared according to agreement.
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Islamic finance also prohibits gambling and speculative activities
As stated in Surah Al-Maeda, Verse 90:
“O ...
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