The range of
financial transactions that conform to the sharia, or Islamic law. Islamic finance forbids
investment in industries considered sinful, notably alcohol, pornography and armaments. Islamic law also forbids the payment or receipt of
interest. This forces
credit to be either
interest-free, or, more commonly, to take the form of a
partnership or
joint venture. For example, a
bank could
buy an
asset for
cash and then re-sell it to the "
borrower" for a
profit such that the profit is the same as the bank would have made had it extended a regular loan.
Islamic finance also forbids
speculation. Thus,
futures contracts and
options are not permissible. These restrictions have made Islamic finance rather
risk averse; it has a tendency to invest in
fixed assets with an
intrinsic value apart from the transaction. Critics within Islam claim that Islamic finance imitates conventional finance and therefore is not truly "Islamic." However, it became a major growth sector within finance in the early 2000s. See also: Sukuk,
Murabaha, Mudharaba,
Musharika.