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Glossary

Islamic Syndicated Loan

Category — Islamic Finance
An islamic loan is a kind of borrowing, granting or bank servicing money in accordance with the Islamic law (Sharia) and Islamic economics.
It is a fundamental principle of Islamic finance to avoid any financial activity that may be deemed harmful or risky to the borrower.

Features of Islamic loans:
• Prohibition of riba (unjustified increment in money or certain goods in a transaction) and usury.
• Distribution of profits and losses.
• The Islamic loan suppliers are strictly forbidden from charging any interest on a loan.

An Islamic loan can be interest free, but often it is a more complicated transaction. For example, a bank can buy an asset outright and then resell it to a "borrower" for a profit, the same as if the bank had granted a regular loan. The bank may also become the "borrower’s" partner, so that both would jointly own the asset or business financed by the loan, and the "borrower" would gradually buy a share of the bank’s ownership by making payments. Thus, most Islamic loans are partnerships or joint ventures.
Terms from the same category