Islamic Banking Quiz

Riba in Islamic Banking

• Riba is a term in Islamic banking that refers to the act of usury or interest, considered a prohibited practice in Islamic finance.
• It involves charging excessive interest or exploiting the borrower, which is seen as unjust and unethical.

Purpose of Making Riba Illegal

• The purpose of making riba illegal under Sharia law is to promote fairness, justice, and equality in financial transactions.
• It aims to prevent exploitation of the borrower and protect their rights, ensuring that both parties benefit from the transaction.

Difference between Riba and Murabaha

• Riba is a prohibited practice in Islamic finance, while murabaha is a permissible and Sharia-compliant financing technique.
• Murabaha involves a cost-plus financing arrangement, where the seller discloses the cost of the product and the profit margin, allowing the buyer to make an informed decision.
• The key difference lies in the transparency and fairness of the transaction, with murabaha promoting a more ethical and just financial practice.