Most people who have done their home will tell you that Islamic finance is a type of financing activity that must comply with Sharia (Islamic Law). However, the concept can also refer to the investments that are permissible under Sharia. The common practices of Islamic finance and banking came into existence along with the foundation of Islam.
Despite this, it was only until the 20th century that the establishment of Islamic finance took place. In this modern day and age, the Islamic finance sector grows at 15%-25% per year, with Islamic financial institutions overseeing over $2 trillion.
It is easy to wonder what makes Islamic finance that much popular when compared to a conventional market. Fret not since that’s what this simple guide will help you uncover today. For starters, Islamic Finance is widely known to support longer-term investment. This comes in handy for any investor who wants to reap maximum benefits from their investments in the long run.
In a conventional market, it is evident that investors yearn for quick returns. They try to predict the next hot industry and jump in and out at the right times. Most quite on the buy-and-hold investment philosophy to build a fortune. However, this action seems to be outdated in an era where people can make cheap online trades at any time.
The problem is the apt decisions aren’t always profitable, and picking the next hot industry is never easy. This, in turn, wastes a lot of money and investors learn that buying and holding aren’t quite effective.
Things tend to be different with Islamic finance considering its approach to investment encourages slower, more thought-out decision. A Muslim investor seeks to avoid companies that harm people or the environment at all costs. Every Islamic fund screens for such companies as the first step.
They then proceed to do away with companies that carry risky financial practices to reduce risk and create investment stability. In short, you can always count on Islamic financial products any time you want to invest for the long haul.