Which principle does Islamic finance strictly prohibit?

Islamic finance is governed by a set of principles derived from Islamic law (Sharia), which emphasize ethical investments and the prohibition of activities that are considered harmful or exploitative. One of the core tenets of Islamic finance is the prohibition of interest, known as "riba." Riba is considered unjust enrichment and is strictly forbidden because it leads to unequal wealth distribution and exploitation. Additionally, Islamic finance prohibits excessive uncertainty, or "gharar," in transactions, as it can lead to deception and unfair advantage.

The emphasis on avoiding both interest and uncertainty ensures that financial transactions are conducted in a way that is fair, transparent, and equitable for all parties involved. This principle encourages investments that promote social welfare and community development, aligning financial activities with ethical considerations.

In contrast, investing in real estate, making charitable donations, and engaging in collateral-based loans are all activities permissible within the framework of Islamic finance, provided they comply with the ethical and risk-sharing principles laid out in Sharia.