Islamic finance is usually presented to Western audiences in reassuring terms. Muslims, we are told, are forbidden to pay or receive interest. Conventional mortgages therefore exclude observant Muslims from home ownership. Islamic finance provides an ethical alternative based on shared risk, responsible investment and interest-free banking. But is this true, and is it right?
Islamic finance is not simply ordinary banking with the interest removed. It is finance intended to comply with Sharia and presented as Sharia-compliant, requiring Islamic authorities to determine what is permitted, how transactions must be structured, which businesses may receive investment, and whether individual financial products meet Islamic requirements. Whether the resulting products actually conform to those principles is another question.
