Islamic finance prohibits which of the following?

Islamic finance strictly prohibits interest, known as Riba, because it is seen as exploitative and unjust. The prohibition is rooted in the idea that making money from money unfairly benefits the lender at the expense of the borrower without providing any tangible asset or value in return. In Islamic financial principles, wealth should be generated through ethical means, and any returns on investment must be tied to real economic activity or risk-sharing arrangements.

This prohibition promotes fairness and equity in financial transactions, encouraging risk-sharing between parties rather than one-sided benefits to any individual. Thus, adhering to these principles fosters a financial system based on actual investment and productive engagement rather than on interest income alone. This is a fundamental tenet of Islamic finance, which aims to create a more equitable economic system.

In contrast, options such as risk-sharing, asset-backed financing, and financial transactions are principles that are actually supported within Islamic finance. Risk-sharing encourages partnerships where all parties have a stake in the outcome, asset-backed financing ensures that financial transactions are connected to tangible assets, and financial transactions themselves are permissible as long as they comply with Sharia law principles, excluding Riba.