Islamic finance is a financial system that is regulated and controlled by the Islamic Shari'a (Islamic law).
Islam consider some of the financial instruments used by the conventional ecosystem as impermissible. Such as Interest, gambling, speculation, gharar and dealing with other prohibited commodities ( e.g Alcohol, fork e.t.c ).
The DeFi
Decentralized Finance (DeFi) is a financial arrangement that eliminate the middlemen interference in transactions.
The traditional or centralized finance on the other hand deals with the financial institutions which stand between the merchant and his client/s in making payments.
The existence of these third-parties brings about more criticisms to the system and create the chance that makes the DeFi continuously and potentially adopted.
Comparison between DeFi and Centralized finance
One thing that differentiate the Traditional (centralized) finance and Decentralized Finance is the financial institutions that stands in between. And this is the point which people criticize centralized finance with. These middlemen make profit at any given chance by facilitating the trade.
People accept policies by these financial institutions even though these policies are more likely to favour them ( financial institutions).
One of the problematic issue regarding the centralized finance that is also affecting the Muslim community is the high interest rate.
Note: interest is totally prohibited in Islamic financial system.
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