What is the Importance of Contracts in Islamic Finance?

Islam attaches great importance to the sanctity of contracts and encourages all parties to a contract to write down terms, rights and obligations to avoid potential disputes.

The property of a person in Islam is sacred and inviolable. Islam has laid down guidelines for the protection of parties to a contract and explicitly prohibits the illegal seizure of someone else’s property through fraud, theft or deception.

These prohibitions provide additional protection to contracting parties and are in addition to the prohibitions of Riba (interest), Garara (uncertainty) and Maysira (gambling), which are considered illegal means of embezzlement..

What are the main contracts in Islamic finance?

The main contracts used in Islamic finance can be divided into three categories: transactional, equity (stock), and ancillary contracts.