12.3 Principles underlying Islamic finance: principle of not paying or charging interest, principle of not investing in forbidden items; ethical investing; moral purchases

The principles underlying Islamic finance are based on the principles of Islamic law (Shariah) and seek to create an ethical and socially responsible financial system. Some of the key principles include:

1. Prohibition of Riba (Interest): Islamic finance prohibits the payment or charging of interest (riba). This principle is based on the belief that money should not generate money on its own, and wealth should be earned through legitimate business activities.
2. Avoidance of Haram (Forbidden) Investments: Islamic finance avoids investing in industries or activities that are considered haram (forbidden) according to Islamic teachings. This includes sectors such as gambling, alcohol, tobacco, pork, and weapons. The focus is on investing in halal (permissible) activities that promote social welfare and economic development.
3. Ethical Investing: Islamic finance encourages ethical investing, where investments are made in businesses that are socially responsible and aligned with Islamic values. Investments should promote fairness, justice, and sustainability while avoiding activities that harm society or the environment.
4. Moral Purchases: Islamic finance encourages individuals and businesses to make moral purchases, ensuring that the products and services they acquire are in line with Islamic principles. This includes purchasing halal food, avoiding interest-based loans for personal consumption, and supporting businesses that follow ethical and fair practices.

These principles reflect the Islamic belief in economic justice, fairness, and the avoidance of activities that are considered morally or ethically problematic. Islamic finance aims to create a financial system that promotes ethical conduct, responsible investing, and social welfare while avoiding exploitative practices and investments in forbidden activities.