Finance based on fair play

PUBLISHED : Monday, 23 June, 2008, 12:00am
UPDATED : Monday, 23 June, 2008, 12:00am

Earlier this year, the government announced that it wanted to introduce an Islamic finance platform in Hong Kong. Since then, various seminars have been held and an agreement signed with the Dubai International Financial Centre Authority last month.

What is Islamic finance?

Islam is one of the main religions in the world. It defines religious and moral principles which apply to all aspects of Muslims' lives, including economics, trade and finance.

Islam requires that financial transactions are based on justice and fair play. They should be free of interest (called riba in Arabic) and without risk, in keeping with the religious ideals. If there is a risk, it should be shared by the two parties who have to be equally informed.

Making money through the ignorance of the second party is not accepted. Islamic banks earn money through fees, instead of interest, and transactions imply profit sharing, joint ventures or leasing.

Many modern banking concepts were developed during the Islamic Golden Age in the 10th and 11th centuries, and adopted by western banks.

Led by Egypt, Islamic finance gained prominence again in the 1970s in the Middle East and non-Arab Muslim countries like Malaysia. It has been boosted by the money from the oil industry.