When it comes to Islamic finance, one concept that frequently comes up is riba (interest). Riba is prohibited in Islam, as it involves the exploitation of one party by another. For this reason, a riba-free financial system is a core feature of Islamic finance.
In 2018, there were a number of developments in the area of riba-free finance. One important development was the agreement between the Islamic Development Bank (IDB) and the International Islamic Trade Finance Corporation (ITFC) to collaborate on the development of a riba-free trade finance program.
The program will provide financial support to small and medium-sized enterprises (SMEs) in member countries of the Organisation of Islamic Cooperation (OIC). The focus will be on supporting SMEs in the areas of trade finance, supply chain finance, and export finance.
This is a significant development, as SMEs are an important engine of economic growth in many OIC member countries. However, they often struggle to access the finance they need to grow and expand. A riba-free finance program that is targeted specifically at SMEs could help to address this issue.
Another important development in 2018 was the issuance of a fatwa by the Islamic Fiqh Academy (IFA) on the use of cryptocurrencies. The fatwa stated that cryptocurrencies should be treated as a form of property, rather than as a form of currency. This means that they can be used for investment purposes, but not for transactions that involve riba.
This is an important ruling, as it provides clarity on the issue of cryptocurrencies in Islamic finance. Cryptocurrencies have been a topic of debate among Islamic scholars, with some arguing that they are not permissible because they are not backed by tangible assets. However, the IFA’s ruling suggests that there is a place for cryptocurrencies within Islamic finance, as long as they are used in a way that is consistent with religious principles.
Overall, 2018 was an important year for the development of riba-free finance. The agreement between the IDB and the ITFC, and the fatwa on cryptocurrencies, are just two examples of the progress that is being made in this area. As more and more Islamic financial institutions embrace riba-free finance, it is likely that we will see even more innovative solutions that meet the needs of businesses and individuals while remaining true to Islamic principles.