ABSTRACT
Islamic finance is a set of principles and contracts based on the Shariah that guide financial transactions. The Shari'ah is composed of the Quran, the holy book revealed by Allah to Prophet Muhammad, and the Sunnah, which is the Prophet’s sayings, actions, and approvals. The Quran contains a variety of extensive principles that pertain to various aspects of human life such as justice, and others that pertain to specific aspects of human life like financial transactions, such as the prohibition of extreme uncertainty. The Quran, being a legislation, which aims to lay down the general principles of conduct in human interactions, has given due attention to financial transactions. The base financing rate is a praiseworthy initiative developed to distinguish Islamic finance from conventional finance, especially when one considers the difficult environment in which Islamic finance exists and in which conventional financial institutions dictate the terms of the greater financial system.
