Page "Sharia" Paragraph 77

Islamic law recognizes private and community property, as well as overlapping forms of entitlement for charitable purposes, known as waqf or trusts.

Under sharia law, however, ownership of all property ultimately rests with God ; while individual property rights are upheld, there is a corresponding obligation to share, particularly with those in need.

The laws of contract and obligation are also formed around this egalitarian Quranic requirement, prohibiting unequal exchanges or unfair advantage in trade.

On this basis, the charging of interest on loans is prohibited, as are other transactions in which risks are borne disproportionately to the potential returns between parties to a transaction.

The limits on personal liability afforded by incorporation are seen as a form of usury in this sense, as is insurance.

All these inequities in risk and reward between parties to a transaction, known collectively as riba, are prohibited.

For this reason, Islamic banking and financing are partnerships between customers and institutions, where risk and reward are distributed equitably.

Partnerships, rather than corporations, are the key concept in collective Islamic business.

Financing and investments are accomplished in this manner, as purchases and resales, with equity shifting over time between the institution and the client as payments are made or returns are recognized.

Conversely, no individual is shielded from the consequences of poor judgement or bad timing.

The Islamic financial and investment models have taken root in the West and begun to flourish, even as the financial underpinnings of large Western corporations collapse under the weight of unevenly distributed risks.

Classic Islamic law details the manner of contracting, the types of transactions, the assignment of liability and reward, and the responsibilities of the parties in Islamic trade.