Glossary

Islamic facility

Islamic facility is a loan where the receiving bank is not allowed to charge any interest (nominal, simple and compound, fixed or floating). However, the financial institution has a right to gain profit from lending in a different way. For example, it can become an equity partner in the funded project fully sharing risks and premiums of the enterprise. It can also have a right to participate in trading and gain profit from the difference between the price at which goods were purchased and the price of their sale. Given that, Sharia law bans investments in production and sale of alcohol, drugs, weapons, pornography, etc. Any trade contract has to be based on the principle of justice and cannot be about any unlawful enrichment of any party.
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