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Principal of Islamic Economics is to
share and act for common
apprehension which can be taken as
the prime importance through
participation in eliminating risk in
the transactions been transacted
through guiding rules of the Islamic
Financial System for participation
 Rule of Profit & Loss sharing is Participation.
 Loan leads to seeking price of money that
increase in capital.
 Financing is made on principle of safety for
capital and obtaining profit.
 Expenditure is deducted from profit and not
from capital.
 Profit which can be distributed is net profit
and not gross profit.
 Islamic Financial System allow
participation in Joint Stock
Companies or Limited Liability
Companies from its accounts or can
participate in a part of the capital of
existing companies
 Financing working capital in projects
at short term financing with
participation which is not lent at
 Legitimate participation is a way of seeking
profit through money from the money owner
and work close of participator at a common
purpose among each participant for earning
 Riba Free Financial House can may be the
money owner and saver the participator or
vice versa.
 The Riba Free Financial Houses
are permitted to be a participator
from employer to re-participate
with the previous participated
funds on a Profit & Loss basis.
 The Riba Free Financial Houses
can be the second participator if it
receives participation from the
first participator.
 The Riba Free Bank may be the second
participator if it receives participation
from the first participator.
 The Riba Free Finance House as money
owner bears loss alone as long as the
participator does not exceed his role.
 If the Riba Free Finance House works as a
participator it does not bear loss as is
sufficient that the Riba Free Finance
House’s effort and work are of no return.
 It is allowed that the profit between money
owner and participator is pre agreed. But if
it is determined sum of principal amount of
money with the condition of no loss then
participation becomes null and void.
 Riba Free Finance House can trade its
funding precious stone and in foreign
currencies on its conditions written down in
the exchange contract.
 Investment in financial securities is only
valid in shares and not in debentures.
In Conventional System
traditions do not approve
the Finance Houses to
perform investments by
itself whereas Riba Free
Finance House break the
tradition in three stages.
 Rule known to us as Muslims that
every person is taken by his words and
 Allah’s word revealed in Script and in
traditions of His Prophet (May Peace be
upon him) for considering that the Riba
Free Finance Houses and their system
are not anything but the blessings and
in to be in transparency which cannot
be break.
 With no doubt Finance Houses with
their present forms and existing
functions rose up in response to
different environments and non
Islamic philosophies in their present
form and they serve these
environments which are not
necessarily convenient for serving
Islamic communities in achieving the
Rules approved by Almighty Allah
 Islamic Financial System guide to
perform direct investments by financing
through participation with clear
understanding the viability of the
transaction as well as profit and loss
being the result on the maturity of the
 The commitment to the result stop the
practice of any other nature that deviate
to Islamic financial system.
 In case pulling continues in the
rest of its operations on the style
of conventional banks and
encloses itself in the field of
lending from the funds received
as deposits and cover its
administrative expenses from
these funds. This damage the
investment and create a war
between the two system.
 Financing by Participation means the
sharing of bank through their capital in
productive and viable project.
 Consequently the bank becomes a
partner in the ownership of the
productive project or transaction as
well as the contributor partner in its
management, its running and its
supervision and also a partner in all
what it yields from profit or loss
according to proportions agreed upon.
 Besides, the bank can sell its
share to a limit restore only the
price agreed upon in the selling
contract either it is less or more
than its capital.
 Justice must be secured and there should not be
exploitation as in the case of loan at interest
where the lender obtains all its capital
completely with an increase in its capital equal
to the mount of interest either the project which
borrowed makes a loss or profit.
 Participation should exist on joint liability
between the financier and the financing in case
of loss and in case of profit.
 Islamic Bank is a partner to the financing
requires in loss as it is a partner in profit.
 From here comes the glorious reference

and great wisdom, thus this participation
in the two cases (loss and profit) oblige the
two partners (every of them) to make the
project prosper, and to do every effort to
supervise it to partake in its success and
therefore the efforts of the two partners
should be faithfully directed to its