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Understanding Shariah Compliance

What is Shariah Compliance?​

Shariah compliance refers to financial practices and transactions that adhere to Islamic law. This law, derived from the Quran and the Hadith (sayings and actions of Prophet Muhammad), outlines ethical, moral, and legal guidelines for Muslims. In the context of finance, Shariah compliance means conducting business and financial operations in a way that aligns with these Islamic principles.

Key aspects of Shariah-compliant finance include:

1. Prohibition of Riba (Interest)​

Charging or paying interest is forbidden. This principle promotes fairness and discourages exploitation in financial dealings.

2. Ethical Investment​

Investments must not support industries or activities considered harmful or unethical by Islamic law, such as gambling, alcohol, or tobacco.

3. Risk Sharing​

Financial practices should involve a sharing of risk between parties, encouraging mutual responsibility and fairness.

4. Asset-Backed Transactions​

Financial transactions should be backed by tangible assets, preventing excessive speculation and uncertainty.

5. No Harm Principle​

Financial activities should not cause harm to individuals, society, or the environment and should promote overall well-being.

How Our Model Aligns with Shariah Compliance​

Our on-chain lending model is meticulously designed to ensure full compliance with Shariah principles:

1. Eliminating Riba​

In our model, transactions are structured to avoid the charging of interest. Instead, we use service fees (Ujrah) and lease-based contracts (Ijarah), aligning with the prohibition of Riba. This ensures that all financial exchanges are conducted fairly and ethically.

2. Ethical and Responsible Investing​

Our platform screens investments and transactions to ensure they support industries and activities that align with Islamic ethical standards. This vetting process guarantees that the financial practices not only yield returns but also contribute positively to society.

3. Shared Risk and Reward​

We incorporate risk-sharing principles into our transactions. For instance, in the case of asset depreciation, both lender and borrower share the associated risks, reflecting the Musharakah and Mudarabah principles of joint venture and profit-sharing.

4. Asset-Backed Transactions​

Our model ensures that all lending and financial activities are backed by tangible assets, such as cryptocurrencies or other digital assets. This adherence to asset-backed transactions reduces speculation and ensures that financial dealings are rooted in real economic activity.

5. Promoting Welfare and Preventing Harm​

Our approach to finance is not only about profit but also about ensuring the welfare of all parties involved. We carefully design our products to avoid causing harm and to contribute to the well-being of individuals and the broader community.

Conclusion​

In conclusion, our on-chain lending model is not just a financial innovation; it's a commitment to upholding the principles of Shariah law. By integrating these ethical guidelines into our platform, we ensure that our financial services are not only efficient and modern but also morally and ethically sound, catering to the needs of a diverse and conscientious user base.