| Islamic trade finance differs from the conventional trade finance system in a few significant ways. Islamic trade finance allows practitioners to transact finances on either of the two models—credit or participation. The most important distinction is compliance with the Shari'a, a set of laws based on the Quran. These rules forbid the payment of interest on the credit extended, also known as riba. Considering that interest payment is one of the main attractions of lending, Shari’a limits the possibility of a common interest levied on transactions involving different countries. Consequently, each deal under the purview of Islamic trade finance must be approved by a board of scholars which offers an alternative to riba to facilitate such lending. |
