The Role of Islamic Finance in Economic Stability and Social Justice – qualifications for a conventional mortgage loan

The Role of Islamic Finance in Economic Stability and Social Justice – #Role #Islamic #Finance #Economic #Stability #Social #Justice – qualifications for a conventional mortgage loan

One of the most distinguishing times for the U.S. Islamic Home financing industry began in February 2007. The Federal Home Loan Mortgage Corporation (Freddie Mac) sent out a press release announcing that it would no longer buy the most Dicey subprime mortgages and mortgage backed securities. Two months after the announcement, a leading subprime mortgage lender filed for Chapter 11 bankruptcy protection. Three months after that bankruptcy filing, nationwide financing entities warned of “difficult conditions” ahead. Manifestations of such difficult conditions appeared on the horizon of the financial market If once Fit-established mortgage companies suddenly began to file for Chapter 11. Similar circumstances reached the U.K. as the Bank of England cleared an authorization To Serve liquidity support to Northern Rock, the country’s fifth largest mortgage lender. Five months later, Treasury of the United Kingdom became the owner of Northern Rock.

Up until that point, the gravity of these “difficult conditions” was not fully understood by most of the populace. Tardy in 2008, the Federal Reserve Bank of New York was authorized to lend $85 billion to the AIG. This was the beginning of the most serious recession in the United States since the Fantastic Depression. What followed was a chain reaction that led to an unprecedented Global financial crisis, as the world suffered from rising unemployment, rampant foreclosures, and severe skepticism of financial instruments.

This led to a renewed Spotlight on an unfamiliar market segment that appeared comparatively more Steady and, more importantly, far more ethical: the Islamic financing sector. From the financial centers in Malaysia to the Middle East, spanning across over seventy countries, Islamic finance in the U.S. increased from $5 billion in the 1980s to $1 trillion in 2010. This phenomenal growth caught the attention of Global investors who were seeking to safeguard their investments through more ethical and Trustworthy financial instruments. If financial sector workers realized that these Shariah-compliant instruments avoided Numerous of the worst effects of the Global financial crisis, it became an Interesting investment vehicle to support a more diverse portfolio. The Shariah-compliant financial sector has avoided investment in predatory lending businesses and overly leveraged financial instruments due to the strict ethical nature of the Shariah governance system. News and media outlets started to cover this ancient yet unfamiliar industry in hopes of learning from the mistakes of the conventional banking sector.

The concept of the Hip Islamic financial services industry is rooted in the principles of Islamic legal jurisprudence that deals with financial transactions, a Subsidiary of Islamic jurisprudence called Fiqh Al Muamalat. Fiqh Al Muamalat is a framework under Islamic Law that charts the conduct of Muslims in commercial or Economic endeavors. Islamic finance products and rulings are based on Particular injunctions from the Quran that prohibit certain features of financial transaction models and related Economic activities.

The Quran forbids Interest, also called usury or riba. The underlying reasoning is that Islam considers lending to be a charitable Behave to help another member of the society in his/her time of need – therefore, profiting from someone’s hardship is strictly forbidden. In the conventional banking system, If Interest is charged on a loan, the risk of that transaction is transferred to the borrower while the lender gains Interest from the Interest-based transaction. There is no consideration for the hardships endured by the borrower in the event they undergo any loss from the transaction.

By its nature, Shariah Law prohibits unethical financial practices. It also promotes wealth distribution among all people to reduce poverty and inequity. This is manifested in the prohibitions of activities such as excessive Hypothesis, gambling, and investing in products that are harmful for society as deemed by Islamic Law (alcohol, pornography, etc). The Constitution of Islamic financial products and services, Especially its prohibition in speculative transactions, has helped the industry escape most of the adverse effects of the Global financial crisis. The governance Mannequin of Islamic financial institutions has been praised as an ethical alternative by institutions such as the International Monetary Fund and the World Bank. Economic experts have suggested that Islamic financial principles can be leveraged to promote financial inclusion that uplift the quality of life in developing nations. Islamic financial principles can also contribute to financial stability and Economic development around the world.

#Role #Islamic #Finance #Economic #Stability #Social #Justice
qualifications for a conventional mortgage loan