Conventional finance is profit-driven, primarily interest-based, and less restricted in ethical terms. Shariah finance follows Islamic law, which prohibits interest, emphasizes ethical investing, and promotes risk-sharing and real economic activity.

The main sources of Shariah law that guide Islamic finance are: Qur'an The holy book of Islam, considered the primary source of divine guidance. It includes broad principles related to justice, fairness, and prohibitions (e.g., against riba—usury or interest). Sunnah The practices, sayings, and approvals of the Prophet Muhammad (peace be upon him). It clarifies and complements the Qur'an, offering more specific guidance on commercial and financial dealings. Ijma (Consensus of Scholars) The agreement of qualified Islamic scholars on a particular issue. Ijma is used to derive rulings when there is no explicit text in the Qur'an or Sunnah. Qiyas (Analogical Reasoning) The application of established rulings to new cases by finding a common cause or principle. For example, if interest is prohibited in one form of lending, it would be analogically extended to similar financial arrangements. These sources form the foundation of Islamic jurisprudence (fiqh) and guide the structuring of Islamic financial products and services to ensure they are compliant with Shariah principles.

The principle of Profit and Loss Sharing (PLS) is a fundamental concept in Shariah-compliant finance, rooted in Islamic teachings that prohibit interest (riba) and promote ethical, risk-sharing financial transactions.