Financing Definition Financing is an act of providing funds for different financial activities as per Islamic laws and regulations.

Islamic banks provide funds as capital for different business activities but these funds are provided strictly in compliance of Islamic laws and shariah. Lending Lending is also act of providing capital for different business activities at a predefined interest rate for a specified period. EXPLAINATION The term Islamic banking refers to a system of banking or banking activity that is consistent with Islamic law (Shariah) principles and guided by Islamic economics. In particular, Islamic law prohibits usury, the collection and payment of interest, also commonly called riba in Islamic discourse. In addition, Islamic law prohibits investing in businesses that are considered unlawful, or haraam (such as businesses that sell alcohol or pork, or businesses that produce media such as gossip columns or pornography, which are contrary to Islamic values). Furthermore the Shariah prohibits what is called "Maysir" and "Gharar". Maysir is involved in contracts where the ownership of a good depends on the occurrence of a predetermined, uncertain event in the future whereas Gharar describes speculative transactions. Both concepts involve excessive risk and are supposed to foster uncertainty and fraudlent behaviour. Therefore the use of all conventional derivate instruments is impossible in Islamic banking. Riba, which literally means excess or addition is strictly prohibited in all transactions of islamic banking. Financing is ideologically compatible with Islamic finance, capable of Shariah-compliancy, and possesses a sizeable potential market. Islamic microfinance tools can enhance security of tenure and contribute to transformation of lives of the poor. The use of interest found in conventional lending products and services can easily be avoided by financing. EXECUTION In financing the bank/institute that provide funds is known as Rab-al-Maal and the person who receive these funds is known as Financier. Financing is strictly in compliance with all Islamic laws. Interest is strictly prohibited in any form. Financing is not allowed for any activity that is against Islamic rules.

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