Islamic finance is a widely used colloquial term for sharia-compliant finance.
Sharia-compliant finance arrangements are ones which are in accord with sharia law.
In sharia-compliant finance and banking products, profit must be derived from commercial risk-taking and trading only, and all forms of interest are prohibited.
Sharia-compliant finance models therefore operate on the basis of risk sharing, to encourage operational investments which may be of benefit to the community.
Furthermore, commercial investments should only support practices that are permitted. Thus, for example, trading in alcohol, pornography, financial services, pork, armaments, tobacco, gambling and other activities contrary to sharia law are not allowed.