Posted by: islamicfinancingnews | February 23, 2012

Understanding Islamic finance in North America

One thing is always apparent to people who understand the multicultural aspect of North Americaand that’s the ability it has to introduce and accept new ideas into the fold. Islamic finance particularly has been gaining a foothold in some of the more popular centers likeToronto and with that in mind, a recent report from KPMG highlighted some of the background that’s necessary to understand the issues involved.

First off, it’s important to understand there are a different set of guiding principles. Shariah or Islamic law is the set of guidelines that are used to set the benchmarks for what can and can’t be done where an Islamic loan or other financial transaction is carried out and these principles are often quite different from the ones governing more traditional Canadian transactions.

For example:

  • Interest on loans is prohibited. That means that Islamic finance transactions involving property generally set up trusts so this interest, or Riba, is avoided.
  • Aside from property, there are areas where Muslim faith prohibits investing based on their beliefs such as pornography, gaming, pork products, as well as arms and ammunitions.

There are various countries globally where islamic finance considerations have been considered and implemented, from Singapore where the government has taken steps to align conventional and Islamic tax products, toAustralia where similar adjustments are being made.

The Taxation Treatment of Islamic Finance in Canada ( hyperlink to PDF file)

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