Islamic Finance

What is Islamic finance?
Islamic finance or Islamic banking is finance or banking which comply with Shari’ah Law.

Shari’ah law prohibits charging interest, which means that interest cannot be charged, nor can it be paid on savings. This is because of the fundamental belief that money itself should not have any value, and so, money should not be made from money.

How does Islamic finance work when buying a house?

When buying residential property, there are a few alternatives to a traditional mortgage.

  1. 1. The first option is called a “murabaha” contract. Here the bank buys the property you wish to buy. The bank then sells it to you at a profit, and you can pay them back in instalments.
  2. 2. The second option is called “musharakah” (partnership) contract. This involves buying the property jointly with the bank and paying the bank over time in instalments for the bank’s share of the property.

This is how the bank covers their costs and make profit due the high risk they took.

Who can use the Islamic finance system?

You do not have to be Muslim to benefit from Islamic finance – anyone can use it

Islamic finance provides higher financial stability. During the global financial crisis of 2008, when financial systems around the world were ravaged, Islamic financial institutions were mostly immune to the shock due to their operating principles of risk-sharing and the requirement that financing must be linked to real assets.

This is why today, Islamic finance is used in over 80 countries, including the UK, and has a trustworthy image around the world.

For expert help on purchasing your property with Islamic finance, you can contact Bond Adams Solicitors on 0116 285 8080 or email us at