NON-INTEREST FINANCE

Ethical finance based on the core principles of fairness and social justice.

DID YOU KNOW

Non-interest finance works on a profit sharing basis, where profits derived from permissible transactions are shared amongst the depositors and the bank’s shareholders

Non-interest banking transactions are based on tangible assets and real services. The table below shows some of the principles and practical differences between non-interest and conventional banking.

Conventional BankingNon-interest Banking
Money is a commodity besides being a medium of exchange and store of value. Money is not a commodity; though it is used as a medium of exchange and store of value.
Time value of money is the basis for charging interest on capital. Profit on trade of goods or rent charged for asset use is the main basis for earning profit.
Interest is charged on loans typically with a security taken by the bank and no further risk is assumed. Bank takes asset risk by acquiring the asset before renting, selling or sharing in its returns.
With asset financing (e.g. car, home financing), the bank lends you money on interest and you purchase the asset. Non-interest banks must first take ownership of the asset and then either rent the asset or sell it on to the customer (on a cost plus basis with deferred payment).
Conventional banking recognises and applies the principle of compounding interest. Profit charged or rent charged do not compound.