The Hypocricy of "Islamic" Banks.
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I have often wondered where they get the money from in the first place. If it is not ALL from deposits, then I'm sure they must borrow it from somewhere.
Also, their "fee" systems does sound suspicious.
And lastly, if you are going to borrow money from a bank, if in the UK, try the co-operative bank first, then a building society, then things like zopa.com and as a last resort, a conventional bank.
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Thanks Pazuzu!
You've made a blurry topic for me quite clear. I'm not much of a bank and finance person, but in my own common sense, I questioned the basic idea of what you've just told us. I thought, gee, what's the difference here? My husband and I got some 'Islamic loans' to finish our house enough for us to live in it and what they made us do was just plain silly....The story is like this we needed kitchen cabinets, so we first went to IKEA and chose exactly what we wanted, then salesman had to keep the list of items, waiting for representative from the bank to come and buy those things for us. He did, and once that was done, my husband had to go to the bank and arrange to re-buy those exact things back from this guy who was nice enough to buy those lovely cabinets just for us! yeah
What a bunch of rigamorale to justify doing basically the same (indeed worse) things than conventional banks!
Now that I understand the situation, I definitely won't bother to go that route again.
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And in the case of house mortgage it is even worse. A relative of mine bought a house in London with an Islamic mortgage. Then they were transferred to another town. They wanted to rent it to keep it and rent in their new town, because they think they will return back to London in a few years. They could not rent it because it was not in their name and the Islamic bank does not allow "buy to rent". They had to sell it and repay the bank ALL its money back.
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And it is in "Murabaha" contracts that their hypocricy is revealed.
Conclusion For those of you who want to finance a car, I recommend you go to a conventional bank and take a cash loan, and spare yourselves the hypocricy of the so-called "Islamic" banks.
Assalaam aleikum
Thank you for exposing the hypocricy of Islamic banks, which are anyway financed and guided by the conventional banks.
I would like to discuss the effects of interest on the countries, economy, society and growth consumerism.etc. Just thinking where to start this discussion for most contribution.
Look forward to you input for or against interest.
best regards
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As for growth an usury, I would use the same excuse why the Catholic church said that by not charging interest it would be actually making a loss by the borrower. later theologians narrowed this usury down to that you're allowed to charge interest on commercial and personal loans made for non-essentials - in other words, if a person needs money to pay for a doctors visit, one shouldn't charge interest (for example).
The interest charged is the amount which they gain back or otherwise they've give you money free of charge and actually lost money given that they've diverted money to a non-profitable venture, and infact, when you take in inflation, its even worse.
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Peace
Islamic Banking has become very fashionable these days..
I am of opinion that the ordinary banks do not really practice the 'usury' mentionned in Quran.
At that time, the land owners had to commit themselves totally and were under some sort of slavery if they cant return back their money.
However, banks provide a certain % depending upon our level of savings..This is realistic in the sense that the value of money is always increasing.Also,the banks are rewarding us with a return..Islamic Banking works on a sort of commission basis..
Frankly I dont find any difference except their commission might be lower on their lending..
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Peace Soraya
We have been discussing this issue in our Quranic Group in JOhannesburg recently.
Islamic Banking has become very fashionable these days..
I am of opinion that the ordinary banks do not really practice the 'usury' mentionned in Quran.
At that time, the land owners had to commit themselves totally and were under some sort of slavery if they cant return back their money.
However, banks provide a certain % depending upon our level of savings..This is realistic in the sense that the value of money is always increasing.Also,the banks are rewarding us with a return..Islamic Banking works on a sort of commission basis..
Frankly I dont find any difference except their commission might be lower on their lending..
First, I think the fundamental point regarding ribaa is missed in most discussions on the subject. This point being the nature of money today. Money, today, is based on falsehood. It is not real in any sense of the word.
- Money is created out of nothing through the law of creation of money
- Even when money is actually printed, it is printed at a minute fraction of it's value
- The business of federal reserves is in most cases a private enterprise that profits from printing at a fraction of the cost & selling at ull face value
- If one goes back to the beginning of modern banking, you find that when loans were issued, any interest that needed to be paid back did not physically exist, hence it was physically impossible to pay back the interest on the loan
These are the first issues that need to be resolved if one would like to look at how an quranic Economy should work.
Another point of note is that if we look at a mortgage versus renting a property, who is guilty of more serious ribaa? The bank or the landlord? If you take a mortgage for 20 years, you own the property at the end of the term. If you rent for 20 years, you own nothing. Who is acting more unjustly?
If anyone wants to look at the establishment of an Islamic Economy, there are many issues that arise before the issue of ribaa does. Briefly, I will outline some of the initial issues here for anyone interested in contributing their views.
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God has placed the value of life as an extremely imporant aspect of the Quranic system.(532) & punishment for murder is severe (492-93).
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God has pomised to provide "rizq" or means of sustenance for all living creatures.(116). (6152; 1731; 2960)
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He does not deliver rizq to each individual directly (3647).
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Our lives & wealth do not belong to us. They have been entrusted to us by God. (9111)
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Excess wealth must be kept open for those whose basic needs are not met (2219)
As to 1, Since God has placed such a high value on life, the means of sustaining life are of extreme importance. God's promise is always true & therefore, there can never be a shotage of rizq on earth according to 2. So, there will always be enough provisions to satisfy the needs of all living creatures. In line with 3 & 4, believers are to ensure that the basic provisions of all living things are met. Therefore, believers cannot accumulate wealth until all creatures needs are being met. This is why I believe savings & investment are not allowed until this situation is prevalent & therefore ribaa becomes a non-issue until this point in time. This veiw is supported by 5, which means in 2219 that one's excess welath must be kept open for consumption by those who do not have what they require.
These are the beginnings of an Islamic economic system. Unless we as believers do not strive to put these affairs of being faithful to fulfilling the trust that God has given us, we cannot even begin to discuss banking, ribaa, etc. I believe that the trust offered to insaan is the trust referred to in (9111). It cannot be free choice, since all entities to whom it was offered had the choice to accept or not. We were foolish in accepting it, possibly because it is difficult for us, but that is the same reason insan has the potential to rise to the heights of human development that are possible.
Hope to here input from interested parties as I am in the process of trying to begin implementation of this system on a small scale in Johannesburg, South Africa. It may be a difficult task, but that should not stop us from trying. Don't be put off by what seems a monumental task. Act locally & God promises success to those who try to implement the Quranic system.
Imraan
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Salaam Imran,
I agree with you that excess would constitute any "savings" and "investment" money. The only way I feel saving is recommended is if you are saving for some foreseeable "event" like college, or a car.1247 He said ?You will plant regularly for seven years, and whatever you harvest you must leave it in its pods, except for the little that you will eat.?
In the above verse they are saving in order to survive the upcoming drought. They had a valid reason so it was fine that the "excess" was not donated.
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peace al,
I recommend reading the following on savings
http//free-minds.org/forum/index.php?topic=8735.msg29090#msg29090Peace Wakas,
Thanks for the link. I never read the story of the orphans' treasure in that way before. It makes sense.1729 And do not make your hand stingy by holding it to your neck, nor shall you lay it fully open so you become in despair and regret.
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Peace Soraya
We have been discussing this issue in our Quranic Group in JOhannesburg recently.
First, I think the fundamental point regarding ribaa is missed in most discussions on the subject. This point being the nature of money today. Money, today, is based on falsehood. It is not real in any sense of the word.
- Money is created out of nothing through the law of creation of money
- Even when money is actually printed, it is printed at a minute fraction of it's value
- The business of federal reserves is in most cases a private enterprise that profits from printing at a fraction of the cost & selling at ull face value
- If one goes back to the beginning of modern banking, you find that when loans were issued, any interest that needed to be paid back did not physically exist, hence it was physically impossible to pay back the interest on the loan
These are the first issues that need to be resolved if one would like to look at how an quranic Economy should work.
Another point of note is that if we look at a mortgage versus renting a property, who is guilty of more serious ribaa? The bank or the landlord? If you take a mortgage for 20 years, you own the property at the end of the term. If you rent for 20 years, you own nothing. Who is acting more unjustly?
If anyone wants to look at the establishment of an Islamic Economy, there are many issues that arise before the issue of ribaa does. Briefly, I will outline some of the initial issues here for anyone interested in contributing their views.
-
God has placed the value of life as an extremely imporant aspect of the Quranic system.(532) & punishment for murder is severe (492-93).
-
God has pomised to provide "rizq" or means of sustenance for all living creatures.(116). (6152; 1731; 2960)
-
He does not deliver rizq to each individual directly (3647).
-
Our lives & wealth do not belong to us. They have been entrusted to us by God. (9111)
-
Excess wealth must be kept open for those whose basic needs are not met (2219)
As to 1, Since God has placed such a high value on life, the means of sustaining life are of extreme importance. God's promise is always true & therefore, there can never be a shotage of rizq on earth according to 2. So, there will always be enough provisions to satisfy the needs of all living creatures. In line with 3 & 4, believers are to ensure that the basic provisions of all living things are met. Therefore, believers cannot accumulate wealth until all creatures needs are being met. This is why I believe savings & investment are not allowed until this situation is prevalent & therefore ribaa becomes a non-issue until this point in time. This veiw is supported by 5, which means in 2219 that one's excess welath must be kept open for consumption by those who do not have what they require.
These are the beginnings of an Islamic economic system. Unless we as believers do not strive to put these affairs of being faithful to fulfilling the trust that God has given us, we cannot even begin to discuss banking, ribaa, etc. I believe that the trust offered to insaan is the trust referred to in (9111). It cannot be free choice, since all entities to whom it was offered had the choice to accept or not. We were foolish in accepting it, possibly because it is difficult for us, but that is the same reason insan has the potential to rise to the heights of human development that are possible.
Hope to here input from interested parties as I am in the process of trying to begin implementation of this system on a small scale in Johannesburg, South Africa. It may be a difficult task, but that should not stop us from trying. Don't be put off by what seems a monumental task. Act locally & God promises success to those who try to implement the Quranic system.
Imraan
peace brother
alhamdulillah. your efforts are commendable. God willing, we will have a God Alone/Quran Alone discussion group in the country as well. God willing, my wife & I, as well as my children, will get to meet Tony & Hati and the other believers on & off this site.
salams all. ramon.
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peace all
could this be the reason why middle east countries are hiring "non-muslims" from everywhere in the world to work on their banks' insurance/loan departments? would this mean that they are not sure if what they are doing is riba; so the best alternative is not to work on this area thus, the need for foreign finance workers?
just asking. reality bites.
salams & God bless. ramon.
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peace all
could this be the reason why middle east countries are hiring "non-muslims" from everywhere in the world to work on their banks' insurance/loan departments? would this mean that they are not sure if what they are doing is riba; so the best alternative is not to work on this area thus, the need for foreign finance workers?
just asking. reality bites.
salams & God bless. ramon.
Highly unlikely. The more likely reason for employing "non-muslims" is that they have more experience with these systems of finance. If they were unsure of if it was "riba" or not then the middle-eastern countries would not be large investors in Western Banks which is definitely "riba."
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My personal opinion is that interest is unethical. The reason is that money should not have an intrinsic value in itself. It should not be bought and sold. Money is a means of exchange, not an end in itself (I'm not really good at explaining, but I hope you can understand). Many philosophers even before Islam, agreed on this. If you think about it, when a bank gives you a loan, they are technically selling you money! I can understand selling a car, or a house, or fruits, etc...but selling cash itself - which is meant to be a means of exchange, not a "good" in itself - is unethical. >(
Both paper money and interest are ethical, convenient and best forms of trading. When a bank lends or you borrow a loan, it is technically a service and for this service they charge you "variable" interest based upon your credit standings and type of loan.Assume I go to a bank now and take a loan of $5,000 for a term of five years, with interest amount totalling $1,000. This means that after 5 years, I have to repay the loan as $6,000.
Conventional banks don't care what I am doing with this money. They don't care if it's being invested or not. They base their interest on absoulte future value. So, even if I take the money and put in in a drawer, and lock the drawer; after 5 years, I would still owe the bank $6,000. Hence, the money has "grown" by $1,000 for no reason other than time value!
That is not true and banks do care depending upon what type of loan, your credit standings and for what purpose you are requesting; such as mortage loans, personal loans, car loans, educational loans, refinance loans, etc., etc. It would be foolish for banks to hand over large sums of money blindfoldedly.Instead of going to a conventional "riba-consuming" bank, and taking a cash loan of $5,000 to buy a car, I decide to go to an "Islamic" bank and have them finance the car for me, and allowing me to repay it, in monthly installments, over a period of 5 years. Technically, the Islamic bank buys the car form the dealer for $5,000, and sells it to me for $6,000. However, they tell me that this extra $1,000 is not riba. It is lawful profit. As for the installments over 5 years, they have given it to me because they think I am credit-worthy, and they want to "help" me finance it.
This is true for all banking systems. Islamic banks don't actually buy cars from dealers and keep them in their lots to lend you money but they secure the car dealers and secure themselves by lending you a loan based upon the loan type, your criteria, your credit-worthiness, collateral, leins, etc.In the Islamic Murabah system, however, their is no such exemption. Even I repayed the loan after only one week, I would still have to pay the full $6,000, because the extra $1,000 is considered PROFIT, not riba. It has nothing to do with future value. So far, this is logical and acceptable.
Your example is misleading. The $1000 charge in interest by conventional loans may not be the same exact amount charged by Islamic banking due to variable interest rates and types of loans.Now the question is Why does the Islamic bank set their profit differently for different credit periods?
In teh above example, if I were to finance the car over 6 years instead of 5, they would raise their "profit" to $1,200. (Total repayment would equal $6,200). On the other hand, if the contract was over 4 years, the "profit" would only be $800!! (Total repayment = $5,800).
The same is true for conventional banking systems. If you were to take out a 30 year loan term instead of 15 years on a conventional lending, you automatically end up paying more. Interest rates depends upon economic situations, LIBOR, types of loans and credit standings.Why are they increasing their profits as the finance period is increasing??
When the finance period or term or number of years increases, the risk factor becomes greater and hence the "increased profits" on their part. This is common sense and justifiable.If the reason is because of increased risk, they could ask for extra guarantees or collaterals for credit periods over 5 years (perhaps a guarantor, a mortgage on a car, or to freeze a sum of money in the bank). But that does NOT give them the right to increase their profit.
Guarantees and collaterals are always considered by ALL BANKS and lenders and is the backbone of lending. One can either pay a little more or lose your collaterals?This is an example of double standards. They are applying the consequences of profit where it suits them ( by not dropping any profit for early settlement), but on the other hand, they are treating it the same as time-value interest when it comes to extending the credit period >(
You talk about double standards yet do not realize what is currently happening in the conventional westernized banking systems (USofA) that has shaken up the world in distress. This is the second time in recent history that the Western Banking Systems have gone into "Great Depression" which has taken the world in shock including the Islamic Banking Systems, but can you quote any Isalmic Banking Depression that has taken the Western Banking Systems and its own in "Great Depression? Why and How is that? -
Peace aalmakto
Salaam Imran,
I agree with you that excess would constitute any "savings" and "investment" money. The only way I feel saving is recommended is if you are saving for some foreseeable "event" like college, or a car.1247 He said ?You will plant regularly for seven years, and whatever you harvest you must leave it in its pods, except for the little that you will eat.?
In the above verse they are saving in order to survive the upcoming drought. They had a valid reason so it was fine that the "excess" was not donated.
I think that the important thing in the verse you quoted is that the situation was pertaining to the community as a whole. The storing was necesary in order to fulfil the amaanah wew are responsible for.
Imraan
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Peace Wakas,
I recommend reading the following on savings
http//free-minds.org/forum/index.php?topic=8735.msg29090#msg29090I read the link. The problem, I think is that we cannot store wealth until the amaanah given to us as per 9111 (i.e distributing wealth until all creatures basic needs are met (116). (6152; 1731; 2960)) is fulfilled. Once this is done, it may be possible to store wealth.
Imraan
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Peace Ramon,
Thank you for your kind words & encouragement.
You replied to Wakas
peace all
could this be the reason why middle east countries are hiring "non-muslims" from everywhere in the world to work on their banks' insurance/loan departments? would this mean that they are not sure if what they are doing is riba; so the best alternative is not to work on this area thus, the need for foreign finance workers?
just asking. reality bites.
salams & God bless. ramon.
I suggest you read Confessions of an Economic Hitman by John Perkins.
In his book John Perkins relates a story that led to expat industry in the Middle East. It was basically the Arabs' unwillingness to do the work themselves that sparked this industry. Also because they didn't loans from the IMF or WOrld Bank, they were convinced to deposit their money in US banks, while the massive amounts of interest generated would be used to pay US & other service providers for services in the Middle East.
THis is according to John Perkins, so I'm not sure how true it is, although he is a man who was on the inside & came clean.
Imraan
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Peace Prissy
Both paper money and interest are ethical, convenient and best forms of trading. When a bank lends or you borrow a loan, it is technically a service and for this service they charge you "variable" interest based upon your credit standings and type of loan.
Could you please explain how this is ethical?
The history of not just paper money, but currency in general is based on falsehood. Indeed it is very ironic that Gordon Brown and others have stated recently that we need to restore trust in the bakning sector, when its very root was an absolute & total disregard for what was entrusted to them as banks. I think you may find it useful looking into the history of money, rather than basing your opinion on the situatioin as it presents itself today.
That is not true and banks do care depending upon what type of loan, your credit standings and for what purpose you are requesting; such as mortage loans, personal loans, car loans, educational loans, refinance loans, etc., etc. It would be foolish for banks to hand over large sums of money blindfoldedly.
HOwever, have you thought about the fact that when you take out a loan, of say $1000, you actually empower the bank with approximately $1900, of which $900 does not exist, & when you repay, say $100 back per month, you empower the bank with $190, of which $90 does not exist, etc., etc. It is not as foolish as you may think.
You talk about double standards yet do not realize what is currently happening in the conventional westernized banking systems (USofA) that has shaken up the world in distress. This is the second time in recent history that the Western Banking Systems have gone into "Great Depression" which has taken the world in shock including the Islamic Banking Systems, but can you quote any Isalmic Banking Depression that has taken the Western Banking Systems and its own in "Great Depression? Why and How is that?
I am not sure if this is in defence of Islamic Banking? If it is, could you please provide the Quranic basis for Islamic banking?
Imraan
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Peace Wakas,
I read the link. The problem, I think is that we cannot store wealth until the amaanah given to us as per 9111 (i.e distributing wealth until all creatures basic needs are met (116). (6152; 1731; 2960)) is fulfilled. Once this is done, it may be possible to store wealth.
Imraan
peace,
I do not see how the verses you cited support what you said.
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Peace Wakas
peace,
I do not see how the verses you cited support what you said.
God has placed the utmost value on life. He has pomised to provide "rizq" or means of sustenance for all living creatures.(116; 6152; 1731; 2960). He does not deliver rizq to each individual directly (3647). Our lives & wealth do not belong to us. They have been entrusted to us by God (9111). Excess wealth must be kept open for those whose basic needs are not met (2219).
Since our wealth does not belong to us, but to God, we should be using His wealth to meet the basic needs of everyone (i.e. acting as His "khalifah" on earth by distributing that which He has provided for all living creatures) before we use it for anything else.
We cannot look at savings & how it is permissible until nobody is wanting for basic needs such as food, clothing & shelter.
Imraan
