What is Islamic finance?

Islamic finance is finance that is in accordance with Islamic law. The goal of Islamic finance is to create economic and investment structures that are not only profitable, but also sharia-compliant.

The idea behind Islamic finance traces back to at least 638 CE when the Third Caliph, Uthman bin Affan, ordered 

Muslims in Mecca (in modern day Saudi Arabia) to deposit their gold with him during a time of war against Byzantine Emperor Heraclius.

The idea behind Islamic finance is to create a parallel economy unlike the one Muslims are required to follow in the modern world. Since Muslims can be in the modern world and also observe Islamic laws, there needs to be a separate, parallel economy. Therefore, there must be an alternative set of rules that people can use for financial transactions.

One of the first books that deals solely with Islamic finance is entitled "Iqbal ul-Mu'aridi" written by Mu'aridi in 1260 AD.

Islamic banking is the practice of banking using financial regulations and practices that are based in Islamic law. Islamic banks operate according to the principles outlined in the Quran and their founders' interpretation of Sharia law. There are many interpretations of sharia so it can be difficult to pinpoint exactly which rules are sharia-compliant.