Talk:Islamic banking

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new section[edit]

Compliments to User:Silver_Maple for excellent work. This article should be very clearly about the mechanics of banking, and should parallel the main article on banking as much as possible (that is, it should be more a way to figure out HOW Islamic banking works than WHY, which is what Islamic economics seems to be for). Also see Talk:hadith for another issue: could we see first class links to all the major hadith collections (six in all?) so readers can assess how they differ in their character, and (ideally) whether a specific cited hadith is considered authentic by all collections, just five, four, three, two, or just one? EofT

Is riba better translated as Usury and not just the charging of interest alone?

Gharar[edit]

Should this article (or Islamic economics) also consider and explain gharar (usually translated as "uncertainty" - I see it doesn't have an article) which I understand is also an issue with, for example, derivative financial instruments such as options and futures. -- ALoan (Talk) 14:49, 11 Apr 2005 (UTC)

Bith Gharar (uncertainty - also defined as "to put oneself or ones property in jeopardy") and Maysir (gambling - any activity with the potential of total loss to only one of the parties) should be mentioned here. Looking at the underlying principles of any transaction, these are of at least equal importance. In addition, elements of contract validity should be covered. The majority are similar to (english) law such as he fact that counterparties have to be mature and sane, and contracts have to be the result of offer and acceptance. There are however also a few additional ones associated with the subject matter. The subject matter has to have value in the eyes of Sharia'a, must be owned by the seller (hence no short selling) and the seller must be able to deliver to name but a few. In order to provide a balanced overview, these issues need to be addressed —Preceding unsigned comment added by 86.1.110.161 (talk) 20:39, 10 July 2008 (UTC)

Opposition[edit]

Many Muslims and non Muslims alike have opposed these Islamic banks, claiming that they do deal in interest but merely conceal it through legal tricks. Without any citation it is equvalent to imposing the views of the writer, it can not be claimed that majority of the Muslims oppose this new horizon of Islamic Banking. Thsi new field is being developed and several reknown Muslim scholors have already acknowledged the Islamic Banking ventures, therefore it is too soon to state that this cincept has a mssive opposition. for referencePrinciples of Shariah Governing Islamic Investment Funds by Justice(R) Mufti Muhammad Taqi Usmani Mufti Muhammad Taqi Usmani--58.65.129.253 19:47, 16 March 2007 (UTC)

This area of finance seems to share something in common with the "eruv" (see: http://en.wikipedia.org/wiki/Eruv). The eruv has nothing to do with finance but arguably is a "legal fiction" designed to side-step religious dictates, or, at least, to interpret those dictates in the most flexible way possible so as to allow an act or a practice that otherwise would be prohibited. —Preceding unsigned comment added by 72.93.101.97 (talk) 04:45, 15 May 2009 (UTC)

Have any reliable sources been found backing the original statement: "Many Muslims and non Muslims alike have opposed these Islamic banks, claiming that they do deal in interest but merely conceal it through legal tricks."?? Or are there any other sources claiming opposition to this type of banking? I find it hard to believe that a banking style used by a minority of the world could have no criticism or opposition by others. But without reliable sources, this is just speculation. Hamsterlopithecus (talk) 21:57, 6 May 2013 (UTC)

Zeno's edits[edit]

I changed Zeno's editions here in order to not make the intro incredibly imbalanced so that it discusses opposition in depth before it really addresses the subject at hand. I asked that he hadd a quick blurb in the intro about the points but put the bulk into the body, he reverted once without any comment and the second time in a terse manner. I would like the opinions of others on this issue. It is just really bad style and mangles this article. gren グレン 08:42, 13 November 2005 (UTC)

"...in order to not make the intro incredibly imbalanced " The intro is not "incredibly imbalanced." There are two themes in this article: (1) what are the types of transactions used in "Islamic banking," (2) how are these transactions related to contractum trinius (i.e. how are all of these transactions a form of interest in disguise, from an economics and finance perspective). This is why contractus trinius is mentioned BEFORE the list of transactions. -- Zeno of Elea 08:46, 13 November 2005 (UTC)
The introduction is to introduce the subject, you list the complaints before you Islamic banking practices are properly explained. I would be fine if you added something about opposition right after the principles section and then added the blurb I talked to. The intro is imbalanced in terms of size... as it reads now you are making a thesis... Islamic banking practices stil pay interest more or less... which, I don't disagree with as I have said on your talk page, it seems that way to me with my limited knowledge, yet the way you are writing it is shoving this all at the top where it does not belong. "The introduction describes the scope of the document. It gives the brief explanation or you can say a summary of the document. The readers can have an idea about the following text before they actually start reading it." You are making that all the intro, which it is not, the intro should reflect content. I have no problem explaining the basis of concepts for banking in a section above principles. However, if this is going to go nowhere I have asked the opinion of others and we should bring others in... because, it's a style matter... and I don't think either of us are known for our great writing. gren グレン 10:10, 13 November 2005 (UTC)

Zeno, there's no need to go into detail re your opposition to Islamic banking in the introduction. Gren is right. It makes the article top-heavy. It is just not good style. The usual Wikipedia organization is brief intro, then table of contents, then exposition, then pro and con, or however many positions there are. You seem to want to give the con section unusual prominence.

If you want your arguments notiZeno, there's no need to go into detail re your opposition to Islamic banking in the introduction.ced, at the end is the right place. Debaters want the last place and the last word. You're being favored, so it's counterproductive to complain. Zora 10:15, 13 November 2005 (UTC)

"Zeno, there's no need to go into detail re your opposition to Islamic banking in the introduction."" Firstly, Zora, this is not regarding my opposition to Islamic banking. This has nothing to do with me specifically. I take offense to your deragotary style of writing, and suggest that you act in a more civil manner. As the text and the source clearly indicate, there are two issues here: (a) what is "Islamic banking" really, and (b) since it really is interest some Muslims oppose it on those grounds. The fact that Islamic banking is interest banking permeates this article. That is why the mention of contractum trinius and the underlying interest banking nature of "Islamic banking" is mentioned in the introduction, and is then elaborated upon transaction by transaction. This article is not a debate. There are two parallel views here: (a) what Islamic banks describe themselves and their transactions as (including their Arabic terminology for each transaction) and (b) what these transactions represent in terms of time value of money (i.e. interest). -- Zeno of Elea 10:24, 13 November 2005 (UTC)

First of all, Islamic Baknking is by no means even close to interest. By means of intrest, many countries are in black hole debts that they have no posibility of escaping. That can not happen witht the implemetation of Islamic Banking, a debt can not run overboard, it can not mutliply to 3 times the original value, without the loaner being able to aford it, bringing her/him/the country into bakrupsy. That is the reason international bankers want to lobby Islamic banking as something bad, so they can get ridd of it and install private banks in disguise, like the Federal Reserve (That is neither federal, nor have reseseves), to suck the country dry. And that is why Zono is here, and that is why he wants the critique in the upper part. Someday, ill add what i wrote to the article, of course well sourced, and of course with Zora reverting me for some nonsense argument.

I strongly oppose of having the critique before the subject is addresed, that goes against WP standards. Also, Zeno, when you have beefed up the cirtique, ill be there to counter argue it.

(discourse on the Federal reserve removed 82.35.248.126 02:50, 21 August 2006 (UTC))

Have a nice day! --Striver 09:35, 17 November 2005 (UTC)

  • "First of all, Islamic Baknking is by no means even close to interest." "Islamic banking" is no different than contractum trinius. Let us say that I want to borrow money to buy a car. The car costs $30,000 which I can repay in 4 years. The car dealership offers to lend me the money for an effective annual fixed interest rate of 7% for 4 years. This means that. after interest, the car will cost me about $40,000. My Muslim friend tells me that Islamic Banks do not charge interest - I am happy because even though I am not a Muslim, I do not want to pay $10,000 in interest for the car loan. If the Islamic bank can give me a zero interest loan then that will be the best thing to ever happen. So I go to the Islamic bank. They do not offer to give me a zero interest loan. Instead, they offer to "buy" the car at $30,000 from the dealership and "sell" the car to me for $40,000, and I can pay the $40,000 back over 5 years. But in the end, the car loan cost me the same whether I went through the normal method or through the "Islamic Bank." This is because the "Islamic Bank" is really charging an effective annual fixed interest rate of 7% for 4 years on a $30,000 loan. The "Islamic Banks" and Islamists insist that this is not interest banking and they are entitled to their opinion, but the opinions of others must also be heard.
Up to this point, the argument looks strong and the two transactions look identical. However, the differences are visible only if you go further on examining the transaction as a whole. If nothing goes wrong, then you are correct that the two transactions are identical. The major difference is when things do not go as planned as in the case if a default on payment happens on the part of the borrower/buyer. In the first case, the loaner is entitled all the principal of the loan plus all applicable interest and any additional monetary compensation for the default on the loan. If the value of the car, the original object that the loan was supposed to finance, at the time of default is not enough then the lender has a legal claim on the borrower's other assets until the financial obligations of the borrower are fullfilled. In the second case, the car is the only asset on which the seller has any claim. Additional compensation beyond the original agreed upon price is not permitted and is considered usurious. To protect the seller, any permissible method can be used in the contract in case of a default on payment, including for example the confiscation of the object sold - the car in this case - or the legal requirement that all remaining payments be due at the present time and hence become a debt. In case of Islamic home financing, some contracts are a co-ownership between the financing entity and the owner of the house. In case of a default, the house is sold and the financial entity regains its share of the house from the sale price. This share can be more or less than the remainder of the "loan", but it reflects the financing companies willing to participate in the risk. Such participation in tranditional banking loans is non-existent. I think to a fair mind, looking at it this way, one cannot say that the two transactions are exactly the same. "Ahmedayad 02:05, 27 February 2006 (UTC)"
I don't see any difference between your Islamic home financing and regular western home financing. If you (persiently) default on your mortgage payments, the house is repossessed and sold by the bank; from the proceeds of the sale, the bank takes what is rightfully theirs (i.e. the outstanding amount on the loan) and the rest you can keep. -DrPizza 23:37, 17 August 2006 (UTC)
With a Western mortgage, if the proceeds from a forced sale are not enough to cover the outstanding debt, the buyer still owes the balance to the lender. As described in the article, Islamic mortgages cannot have this outcome. --99.237.167.136 (talk) 17:01, 31 December 2009 (UTC)

One can easily imagine "Western" mortgages that are not tied to a personal debtor, however, the benefit of personal debtors is a lower risk of default and lower risk of loss for the bank (because one has "collateral" in the personal debtor's personal economy as well as in the object of purchase). This translates to lower interests for the loaners. An islamic loan would be comparable to a western loan with collateral only in the object of purchase. This shifts the risk of price fall to the bank, which means the price of the loan must be higher, either with higher interest in a western loan, or with a higher buy-back price in an islamic loan. In western terms an islamic loan would be a loan with a fixed price of credit (which in turn means a fixed interest and fixed term). The main benefit of an islamic loan (apart from adhering to the religious commands) is that the debtor cannot be enslaved by run-away interest rates, while the downside is a higher cost of credit (a necessary consequence of higher risk). So risk of personal ruin on the one side (traditional western loans), and higher cost of credit on the other side (sharia loans). I think the latter is preferrable. However, in Norway (and probably elsewhere), you have the solution where banks are obliged to not grant loans if the debtor's economy is not capable of supporting the instalments and interests. And should one go personally bankrupt, there are last resort solutions that means that all of the debtor's income above a subsistence minimum goes to the creditors for a fixed period (usally 5 years), after which the remainder debt is nullified. So there are possible solutions that are morally justifiable in western loans as well. Conlusion: Let's not make the debate of western vs. islamic loans a moral dispute, they simply are different solutions with different benefits and drawbacks. Haavard Ostermann (talk) 17:33, 12 August 2010 (UTC)


  • "By means of intrest, many countries are in black hole debts that they have no posibility of escaping. That can not happen witht the implemetation of Islamic Banking, a debt can not run overboard, it can not mutliply to 3 times the original value, without the loaner being able to aford it, bringing her/him/the country into bakrupsy. " Let us take a real example of a government borrowing money. In order to borrow money, the government must issue a bond. For example, the government might issue a 5-year zero coupon bond with a $100 par value for $90. This implies an annual interest rate of about 2%. This just means that you lent the government $90 today and will recieve $100 5 years from today. There is no chance that the loan will grow to 3 times its size. If the government defaults, i.e. if the government fails to pay be back $100 in 5 years from today, then that does not imply that you will now recieve $300 in 15 years from today instead. On the contrary, if the government defaults, then you probably will never see your $90 investment again, and certainly not the $100 that was promised to you. The most you can hope for is to recover some money, after the default, at a "recovery rate" (e.g. you might eventually get $50 from the government on the $90 that you had lent). Governments do sometimes default on loans. This doesn't mean that the government is "bankcrupt" in the sense that individuals and companies can go bankcrupt, rather it means that the government's currency is now in crisis. For example, there was the famous Russian Default of 1998 which led to the fall of Long Term Capital Management (LTCM) and caused the Federal Reserve to (controversially) save LTCM in order to prevent a financial meltdown on Wall Street. In the summer of 1998, the government of Russia defaulted on $40 billion in foreign debt that it owed, due to a currency crisis in the ruble foreign exchange rate. In this case both the lenders of the $40 billion (international financial institutions) and the borrowers of the $40 billion (Russia) suffered from this default. It is the same as if you lent $90 to the Russian government for 5 years and then 5 years later all you got back was $5 instead of the $100 that was promised to you. Now you can't afford food and shelter because you are a retiree who was depending on that $100 fixed income. It is not that the Russian government's debt to you has now grown to 3 times its size, it is that the Russian government has given you just $5 and told you to get lost. But the Russian government has also suffered because people have lost trust in its currency, the ruble's foreign exchange rate has plumeted, and now investors are demanding a much higher rate of return (interest rate) on Russian bonds because investors demand to be compensated with returns for the risks that they take. Of course there is no such thing as government borrowing from Islamic banks because explicit interest banking is needed in order for governments to be able to raise money in the debt capital markets.
  • "That is the reason international bankers want to lobby Islamic banking as something bad, so they can get ridd of it and install private banks in disguise, like the Federal Reserve (That is neither federal, nor have reseseves), to suck the country dry." International bankers are not trying to "lobby Islamic banking as something bad." So-called "Islamic banking" has nothing to do with governemnts or countries borrowing money and "Islamic banks" do not compete with international banks - Islamic banks cater to a market that other banks do not. Islamic banks deal in interest under the guise of two "seperate" transactions in order to circumvent Islamic prohibitions on interest, just as European merchents did in the Middle Ages with contractum trinius. If you borrow money from an Islamic bank to buy a house then you will be paying interest on the loan, and if you fail to pay back the money to the Islamic bank then the Islamic bank will take control of your house (actually, the house remains under the name of the Islamic bank until you pay back the loan, so that the Islamic bank is in full control and can kick you off the property if you fail to pay back the loan). Islamic banks cannot cater to the financial needs of governments and corporations - they only cater to the needs of Muslim individuals and small businesses that wish to go into a partnership. And finally, there is no conspiracy of international bankers to install "private banks in disguise" in order to "suck the country dry." You cannot expect your paranoid conspiracy theories to be taken seriously here.
Regarding the contactum trinius point that you keep referring to, I think the analogy is false. The fact that you can make two separate legal contracts in one sitting so that the result is a usurious transaction was known as early as the time of the prophet. I believe it is called "bay' al-'Inah". The most prominent example of which is to buy a watch - for example - from someone for $120 to be paid over a year period in $10 monthly installments, then simultaneously selling it to her for $100 in cash. The result of which is a 20% interest loan on the $100. This is "haram" according to everybody I know since it is nothing more than trickery. You might be right that some "Islamic Banks" have employed - and some may still are - contracts that is in this fashion. This, however, is an argument against these institutions and not against the concept itself. I should add that many of the institutions that dealt in these transactions have since changed them. "Ahmedayad 02:22, 27 February 2006 (UTC)"
  • "And to inform those who care: The Federal reserve of USA is a corrupt private bank that is taking intrest for money they print from thin air." This article has nothing to do with the Federal Reserve. Why don't you at least take your paranoid conspiracy theories to the proper article?

-- Zeno of Elea 20:55, 19 November 2005 (UTC)

Bible Gambling?[edit]

I am unaware of any verse in the Bible that condemns gambling specifically. Either it should be cited or removed from the article completely. --Jayson Virissimo 09:50, 13 May 2006 (UTC)

Since there is no opposition so far I will remove the specific entry. If there is anything I am missing just let me know --Jayson Virissimo 01:47, 15 May 2006 (UTC)

I have opposition to your removal. The "biblical" banning of gambling or rather games of chance is derived from the recrimination of the Roman soldiers who played dice for Jesus' clothing and personal items as he lay dying on the cross. It would be akin to a Hadith in Islam, not in the Koran, but universally condemned (atleast until recently/modern times were all manner of things are lax) by the established churches (this was universal throughout denominations in older times). So please leave that portion in with my addendum. Also do keep in mind that interest was seriously frowned upon and restricted in early Christianity as well (derived obviously from Jesus and the money lenders) and was almost always seen (while it was by no means restricted to) as a Jewish activity/practice in old Europe/early Western Christianity. Thanks - Karl Lrk

The Christian prohibition on interest did not come from Jesus cleansing the Temple of the money changers (who were not necessarily money-lenders, by the way), but from the Old Testament prohibitions (Deuteronomy 23:19-20, Exodus 22:25-27 and Leviticus 25:35-37, Psalm 15, etc.) Christians merely interpreted themselves as replacing the Jews. This view changed with the Reformation and the rejection of what you describe as a "Christian Hadith". There is nothing in the New Testament prohibiting interest -- indeed, you can easily interpret the Parable of the Talents are permitting it. Epstein's Mother 06:38, 20 January 2007 (UTC)

Copyright issue[edit]

"The first modern experiment with Islamic banking was undertaken in Egypt under cover, without projecting an Islamic image, for fear of being seen as a manifestation of Islamic fundamentalism which was anathema to the political regime." -- This sentence is taken *directly* from http://www.usc.edu/dept/MSA/economics/islamic_banking.html 130.126.247.88 03:43, 31 July 2006 (UTC)

Therefore, the reality is that there was (and perhaps never can be) anything termed as "Classical Islamic Banking" as banking is a very modern concept that actually contradicts the shariah principles of trade and finance. However, as with both Christianity and Judaism before it, there are always those elements that wish to (in their eyes) modernise Islam even if it means going against basic principles that have been accepted for over 1400 years, which is what is happening here.

I've removed the paragraph above becaues it read as being very POV. The contributor or anyone else should rewrite and rephrase it before adding it back into the article. —mako 19:07, 27 September 2008 (UTC)

Yasin Abu Bakr Argwings-Kodhek[edit]

I have deleted the paragraph on Yasin Abu Bakr Argwings-Kodhek because I thought it was a hoax. But I later found an article about Yassin Abubakar Argwings Kodhek: it seems he was running a ponzi "He has ruined the lives of many and has embarrassed the Muslim fraternity),” a distraught Muhammad Abdi told The Friday Bulletin." Maproom (talk) 11:04, 11 October 2008 (UTC)

It's a bit of a joke, isn't it?[edit]

The current version of the article says:

A number of innovative concepts and techniques were introduced in early Islamic banking, including contracts, bills of exchange, long-distance international trade, the first forms of partnership (mufawada) such as limited partnerships (mudaraba), and the earliest forms of credit, debt, profit, loss, capital (al-mal), capital accumulation (nama al-mal), circulating capital, capital expenditure, revenue, cheques, promissory notes, trusts (see Waqf), startup companies, savings accounts, transactional accounts, pawning, loaning, exchange rates, bankers, money changers, ledgers, deposits, assignments, and lawsuits.

Some items in that list may be true, but who can tell where reality ends and the deluded ranting begins? The main point of the list seems to be to warn readers away from the remainder of the article. I thought I could learn about the realities about Islamic banking here, but obviously, any article that claims profit and loaning and money changing were Islamic inventions is utter garbage written with a deluded Islamocentric POV, so it's time to seek the information elsewhere. Yeah, yeah, yeah...many Muslims think that Jesus and Adam and Alexander the Great were all really Muslims or some such thing, so I guess the ancient Mesopotamians and Croesus were too. Anything you like that was invented could be called an early Islamic invention I guess. The wheel? An innovative early Islamic invention... 71.174.193.27 (talk) 21:17, 11 October 2008 (UTC)

Religion is more than a bit of a joke. Islamic banking taking claim for any innovation is utterly laughable 96.32.117.251 (talk) 03:20, 10 August 2011 (UTC)

One must tread carefully[edit]

While the previous writer (==It's a bit of a joke, isn't it?==) is using too much sarcasm in their critique of the article, I do agree that the general tone of the article is based on the assumption that that the world did not really progress to any great extent until something happened 1400 years ago. This is a pity since Islam deserves some credit for the preservation of Greek culture and thinking amid the collapse of the Western Roman Empire.

I fear that any efforts to update this article in a way that neutralizes Point of View content will result in massive edits to make it more "Islamic", nullifying the whole intent of Wikipedia. It is hard to do this without insulting someone.Hschlarb (talk) 20:21, 14 October 2008 (UTC)

However, what I can say categorically is that this page seems to be simply a quick stopover point to publish links to external propaganda sources without adding to the content of the page itself. What this activity implies is that either the community is ashamed of the content or simply uncomfortable that what is published has to stand up to public and critical scrutiny. Probably a metaphor for something. Can't for the life of me figure out what that is, though. Hschlarb (talk) 02:02, 18 June 2009 (UTC)

Removal of Content: Classical Islamic Banking[edit]

The citation for lawsuits (Ray Spier (2002), "The history of the peer-review process", Trends in Biotechnology 20 (8), p. 357-358 [357]. ) in the article is somewhat misleading. I have reviewed this citation and have a copy of it in personal possession. The author is candid in discarding any written history prior to 100 CE, deeming it unreliable. The first article he could find on peer review that fit his definition of history was a document around 820 CE indicating a right to sue based on peer review. It is disingenuous to assume that the ability of two opposing parties to appear before some institution of law to have their case heard and a judgement rendered, the definition of lawsuit, began at this point in time. Hschlarb (talk) 04:56, 11 December 2008 (UTC)

Growth Rate[edit]

This needs a citation, otherwise it's nothing but a very bold and biased claim: "Islamic Banking is growing at a rate of 10-15% per year and with signs of consistent future growth." —Preceding unsigned comment added by Zeenix (talkcontribs) 12:57, 12 June 2009 (UTC)

http://www.economist.com/businessfinance/displayStory.cfm?story_id=13751652 reports that the sukuk market (a part of Islamic Finance) is about 43 billion dollars out of an estimated 50 trillion. If you were to use these numbers as a ratio to represent Islamic Institutional Finance to Total World Financial activity,
Those numbers can only be used to calculate the current volume of islamic banking compared not it's growth rate. You need the past figures (over several years) and current ones to calculate that number. Being from an Islamic state where people have been talking of Islamic banking for years but it never really succeeded even within that country, it's quite hard to believe the number could possibly be that big.
I have made further investigations and have found an article the backs up the claim. As well, this article http://www.thejakartapost.com/news/2009/03/05/govt-asked-exempt-islamic-banking-transactions-taxes.html makes the same assertions on annual growth. It also corroborates your impression on the impact of Islamic banking relative to total economic activity in the area - 3%. Hschlarb (talk) 03:57, 24 July 2009 (UTC)
10-15% growth is quite achievable if you are .09% of the total market. For further information, see Mark Twain and his observation about statistics Hschlarb (talk) 04:35, 17 June 2009 (UTC)
I didn't say 10-15% is not outstanding, I wanted proof[citation] of this claim. If you can't provide that, this claim should be removed.

External sources[edit]

I have added two links with reference to Islamic Banking & Finance, which have been deleted. I have reviewed the Wikipedia's external link policy and it appears that I am in compliance but with a vested interest as the publisher/editor of Islamic Banking & Finance magazine. Islamic Banking & Finance is one of the oldest publications in the Islamic banking and finance sector and is trusted as a reliable independent source by academics and practitioners. In fact, some of the people cited on Wikipedia's pages of Islamic banking and Islamic finance, such as Dr Aly Khorshid, have been published in our journal. Islamic Banking & Finance receives regular invitations to Harvard's Islamic forum and other top conferences in the world as well and counts the Chicago Law Library, New York City Library and City of London Library among its subscribers. ANyway, i hope others will agree this is a good source. On other sources included here are my comments.

Risk and Compliance Management, your first listing, is an external link to an Infosys page. Infosys are an IT company with a peripheral interest in Islamic finance. The company may produce info booklets but they are very commercial and really substandard compared with genuine Islamic publications and companies.

Islamic Banks and Financial Institutions Information FINE Islamic Financial Services Board FINE AIBIM - Association of Islamic Banking Institutions Malaysia FINE Accounting and Auditing Organization for Islamic Financial Institutions FINE Reviewing Islamic Banking ARBITRARY--MUCH BETTER SOURCES EXIST Muslim Investor: A community site on Islamic investment, banking, finance and insurance FINE Value matter of Money - Unfair to Islamic Banking & Finance by Qazi Irfan Amateur essay Riba and Islamic Banking PRETTY MEDIOCRE, ONE-MAN BAND WITH A SEMI-COMMERCIAL OFFERING AND NOT MUCH RESEARCH Islamic Banking references JUST A COLLECTION OF SUBJECTIVE REFERENCES -- SO WHAT? Institute of Islamic Banking FINE Islamic Banking Portal JUST A HOLDING PAGE Islamic Finance Directory and Portal VERY COMMERCIAL AND LIMITED USEFUL INFORMATION Islamic Banking and Finance symposium podcasts from La Trobe University on iTunes GOOD LINK FOR APPLE -- DOESN'T WORK PROPERLY Islamic Banking / Finance / Takaful Directory PURELY COMMERCIAL SOURCE

This section should be claimed by the author or removed. Hschlarb (talk) 03:19, 10 October 2009 (UTC)

Arabic transcription[edit]

I think this being an Arabic theme, it should include Arabic transcriptions, in fact original words, for all or major words. Transcriptions are sometimes difficult to trace back or ambiguous or even arbitrary. Arabic script would help solve all this. Besides, it is Sharia related, and therefore the Law. The least interpretation the better.Consci (talk) 03:18, 28 September 2009 (UTC)

I think there is some confusion here. Sharia Law exists because it is an interpretation of the Koran, Hadiths and fatwas, this last source (fatwas) making "the Law" somewhat dynamic. Further, there are at least five schools of interpretation within Islam as to how and what comprises Shariah and how it should be applied. Perhaps it first could be explained which of these interpretations should be used as the preferred one before we proceed further. Even better, wouldn't it be great to hear from all five? Hschlarb (talk) 03:54, 10 October 2009 (UTC)
You are misunderstanding what those "school of thoughts" constitute. An example of "school of thoughts" would be the different theories that explain gravity. They have different understandings, but they agree on the fundemental, and that is "gravity exists". Your commment above gives the impression that each school of thought is a different "religion" of its own, akin to one that accepts the existence of gravity, and one that does not. Like wise, it is unacceptable for a Muslim to hold to one of the schools as a conviction; if proof from the scripture is found contrary to what that school of thought is claiming on a particular subject, then the Muslim must follow the proof. (By the way, all the 'founders' of the major islamic school of thought made this same comment, i.e. follow the proof). This is ofcourse similar to the previous example of science, if evidence is found contrary to one of the gravity models, then atleast that part of the model needs to be changed; holding on to it, regardless of evidence, is a conviction and is not allowed. —Preceding unsigned comment added by 99.246.101.166 (talk) 14:51, 20 July 2010 (UTC)
"To be successful a product must be Shariah compliant, but there is no one single overriding definition of what actually constitutes compliance – Shariah scholars representing different legal, cultural and faith traditions within Islam may arrive at different interpretations (“ijtihad”) of what constitutes “halal,” or compliance, with Shariah law."

(http://www.washingtontimesglobal.com/content/story/malaysia/569/center-excellence-islamic-finance-and-gateway-malaysia-malaysia-internati). A simple search of the Internet will reveal its magnitude. Hschlarb (talk) 03:24, 22 September 2010 (UTC)

Need Three Infoboxes?[edit]

Right now there are three infoboxes in this article, all the kind made to go along the right side of the article. They are for Banking, Public Finance, and Islamic Jurisprudence. Do we really need all three of these here? Gobonobo T C 10:43, 5 December 2009 (UTC)

(somewhat belatedly) Agree, we don't need 3. Or possibly any. But "banking" seems to be the primary one. Riba leads you easily towards Fiqh if you want it William M. Connolley (talk) 20:57, 4 July 2011 (UTC)

Modern Challenges section[edit]

This looks like a copypaste of a magazine article, but the link is broken. Someone might want to look at a possible copyright violation. 167.181.12.116 (talk) 20:36, 29 January 2010 (UTC)

Fixed Thanks. --Cybercobra (talk) 02:44, 31 January 2010 (UTC)

islamic banking —Preceding unsigned comment added by 82.178.168.193 (talk) 05:09, 17 April 2010 (UTC)

Istisna[edit]

Surprisinly, the concept of Istisna is missing. Dubai Islamic Bank, explains this product as under:

Istisna

Istisna is a Sharia mode of financing widely used by Islamic banks and financial institutions to finance the construction of buildings, residential towers, villas and related products, and manufacturing of aircrafts, ships, machines and equipment, etc.

The Arabic word "Istisna" means "asking someone to manufacture". It may be further defined and elaborated as a sale contract between the seller and the buyer for the sale of an asset described in the sale contract and transacted before it comes into existence. To fulfil its obligation, the seller can either manufacture/construct it by itself or can get it manufactured/constructed by someone else to deliver it to the buyer on the date described in the sale contract. The buyer can pay the sale price in lumpsum at the time of signing the contract or later in different stages as the manufacturing/construction process proceeds.

It would be helpful to include and edited text in the body of the main topic 'Islamic Banking.

The link to article 'Istisna' on DIB:

http://www.dib.ae/en/realestate_istisna.htm —Preceding unsigned comment added by 124.125.8.207 (talk) 08:35, 9 July 2010 (UTC)

Possible sources[edit]

An article that might be used as sources for the article: http://www.washingtonpost.com/wp-dyn/content/article/2008/10/30/AR2008103004434.html — Preceding unsigned comment added by 217.21.225.21 (talk) 09:48, 28 July 2011 (UTC)

Controversy section: "Is Islamic Banking really Islamic?" Actually, I don't care. What I'd like to know is: is it working economically?[edit]

The meaning of Islamic Banking for the muslim world in and outside the middle east of course is an important topic. But I and maybe more users don't care about any Islamic conformity, and would rather like to know: does it work? The current problems within the OECD world caused by an exorbitantly grown financial industry and its bets on bets on bets on real economic acts may be a reason for looking out for another set of rules. Not because "God whilst it", but because it's beneficial in a strictly practical and utilitaristic sense, particularly its prohibition of interest. Does any economist have reliable data on that: how big are the dimensions of Islamic Banking, does it support economic growth, if (probably) not as fast as the western interest system, maybe more sutainable? Is it a real alternative, or just a hoax? Is it, if an alternative, compatible with the major benefits and principles of the capitalist system (steady economic growth, civil rights, private property, democratic rights...)? Some of these aspects are already brought up in the "Principles"-section, but maybe someone answers such questions in some kind of conclusion at the end of the article. --JakobvS (talk) 07:03, 1 September 2011 (UTC)

Islamic banking[edit]

ISLAMIC BANKING SYSTEM Tuesday, April 10, 2012 1:30 PM

WHAT IS BANKING BANKING IS AN INSITIUTION WHICH RECIEVES DEPOSITS OF MONEY AND ADVANCES LOAN

TYPES OF BANK

  1. ISLAMIC BANK
  2. NON ISLAMIC BANK

What is Islamic Banking? System of banking consistent with principles of Islamic law and Islamic economics. Islamic law prohibits the collection of interest, commonly called riba, although revenue-sharing arrangements are generally permitted. With increased

Islamic banking refers to a system of banking or banking activity that is consistent with the principles of the Shari'ah (Islamic rulings) and its practical application through the development of Islamic economics. The principles which emphasise moral and ethical values in all dealings have wide universal appeal. Shari'ah prohibits the payment or acceptance of interest charges (riba) for the lending and accepting of money, as well as carrying out trade and other activities that provide goods or services considered contrary to its principles.

Origin[edit]

The origin of the modern Islamic bank can be traced back to the very birth of Islam when the Prophet himself acted as an agent for his wife's trading operations. Islamic partnerships (mudarabah) dominated the business world for centuries and the concept of interest found very little application in day-to-day transactions. Such partnerships performed an important economic function. They combined the three most important factors of production, namely: capital, labour and entrepreneurship, the latter two functions usually combined in one person. The capital-owner contributed the money and the partner managed the business. Each shared in a pre-determined share of the profits. If there was a loss, the capital-provider lost his money and the manager lost his time and labour.

The following types of accounts were accepted:

  • Savings accounts
  • Investment accounts
  • Zakat accounts

No interest was paid on savings accounts, but withdrawals could be made on demand. Small, short-term, interest-free loans for productive purposes could be made. Funds in investment accounts were subject to restricted withdrawals and invested on the basis of profit- sharing. The zakat account attracted the official amount of zakat.

Deposit accounts[edit]

All the Islamic banks have three kinds of deposit accounts: current, savings and investment. 4.2.1.1 Current accounts Current or demand deposit accounts are virtually the same as in all conventional banks. Deposit is guaranteed. Savings accounts Savings deposit accounts operate in different ways. In some banks, the depositors allow the banks to use their money but they obtain a guarantee of getting the full amount back from the bank. Banks adopt several methods of inducing their clients to deposit with them, but no profit is promised. In others, savings accounts are treated as investment accounts but with less stringent conditions as to withdrawals and minimum balance. Capital is not guaranteed but the banks take care to invest money from such accounts in relatively risk-free short-term projects. As such lower profit rates are expected and that too only on a portion of the average minimum balance on the ground that a high level of reserves needs to be kept at all times to meet withdrawal demands.

Investment account[edit]

Investment deposits are accepted for a fixed or unlimited period of time and the investors agree in advance to share the profit (or loss) in a given proportion with the bank. Capital is not guaranteed.

Modes of financing[edit]

Banks adopt several modes of acquiring assets or financing projects. But they can be broadly categorised into three areas: investment, trade and lending.

Investment financing[edit]

This is done in three main ways: a) Musharaka where a bank may join another entity to set up a joint venture, both parties participating in the various aspects of the project in varying degrees. Profit and loss are shared in a pre-arranged fashion. This is not very different from the joint venture concept. The venture is an independent legal entity and the bank may withdraw gradually after an initial period. b) Mudarabha where the bank contributes the finance and the client provides the expertise, management and labour. Profits are shared by both the partners in a pre-arranged proportion, but when a loss occurs the total loss is borne by the bank. c) Financing on the basis of an estimated rate of return. Under this scheme, the bank estimates the expected rate of return on the specific project it is asked to finance and provides financing on the understanding that at least that rate is payable to the bank. (Perhaps this rate is negotiable.) If the project ends up in a profit more than the estimated rate the excess goes to the client. If the profit is less than the estimate the bank will accept the lower rate. In case a loss is suffered the bank will take a share in it.

Trade financing[edit]

This is also done in several ways. The main ones are: a) Mark-up where the bank buys an item for a client and the client agrees to repay the bank the price and an agreed profit later on. b) Leasing where the bank buys an item for a client and leases it to him for an agreed period and at the end of that period the lessee pays the balance on the price agreed at the beginning an becomes the owner of the item. c) Hire-purchase where the bank buys an item for the client and hires it to him for an agreed rent and period, and at the end of that period the client automatically becomes the owner of the item. d) Sell-and-buy-back where a client sells one of his properties to the bank for an agreed price payable now on condition that he will buy the property back after certain time for an agreed price. e) Letters of credit where the bank guarantees the import of an item using its own funds for a client, on the basis of sharing the profit from the sale of this item or on a mark-up basis.

Lending[edit]

Main forms of Lending are: a) Loans with a service charge where the bank lends money without interest but they cover their expenses by levying a service charge. This charge may be subject to a maximum set by the authorities. b) No-cost loans where each bank is expected to set aside a part of their funds to grant no-cost loans to needy persons such as small farmers, entrepreneurs, producers, etc. and to needy consumers. c) Overdrafts also are to be provided, subject to a certain maximum, free of charge. Services Other banking services such as money transfers, bill collections, trade in foreign currencies at spot rate etc. where the bank’s own money is not involved are provided on a commission or charges basis.

ISLAMIC MODES OF FINANCING 1.FINANCING BY LENDING 2.TRADE RELATED MODES OF INVESTMENT 3.INVESTMENT MODE OF FINANCING 1.FINANCING BY LENDING A;LOAN WITH SERVICE CHARGES The commercial banks are permitted to lend funds free of interest but how ever they are allowed to recive service charges from the borrowers.the maximum service r charges are allowed to each bank are dewtermined by the state bank of pakistan.this type of loan is provided in particularly a.to finance export b.to finance agricultural input by small farmer c.to the salaried persons to met their financial needs B.QARZ-E-HASNA THE FACILITY OF QARZ-E-HASNA IS PROVIDED TO ONLY STUDENT WHO DO NOT HAVE FUNDS TO CARRY ON THEIR EDUCATIONS…….. 2.TRADE RELATED MODES OF INVESTMENT

Mark Up[edit]

The mark up is a purchase of goods by banks and their sale to clients at an appropriate mark up in price on deferred payment basis. The mechanism of financing on the basis of mark up in price of deferred basis is as follows:-

(i) The customer contacts the bank for financing the purchase of goods.

(ii) The bank purchases the required goods and sells these to him on the price mutually agreed between the bank and the customer. The agreed price of goods is to be paid in future on a specified date by the customer to the financier. The agreed price which is based on the basis of banks cost plus a profit margin of the bank (mark up).

(iii) The payment can be made by the customer in lumpsum or in instalments over a specified period of time.

(iv) The mechanism of financing on the basis of mark up is very useful in meeting the working capital requirements of a business.

(2) Mark down. It is a purchase of moveable or immovable property by the bank with Buy Back Agreement or otherwise. According to this trade mode of financing the customer sells the moveable or immovable property to the bank with a promise to buy back the same from the bank on a future date. The payment can be made by the customer in lumpsum or in instalments. The difference between the purchase price of the property by the bank and its sale price to the customer is the profit of the bank.

3) Leasing. Leasing also called ljra is a medium long term financing instrument. In this trade mode of financing the lessee (Mustegir) acquires the use of an asset from the lessor (Ajir) for a fixed agreed period of time on the payment of a fixed amount which may be on yearly, half-yearly or on monthly basis The title of property remains with the lessor. The physical possession of the asset reverts to the lessor after the specified period is over. Leasing is permitted in terms of the Transfer of Property Act.

(4) Hire Purchase. The State Bank of Pakistan has allowed the commercial banks to provide finance for the purchase of machinery to their clients in trade and industry on the basis of hire purchase. In a hire purchase deal the bank purchases the specified goods at the request of the customer and hires them to the client on the payment of periodical instalments. The agreed periodical hire instilments are worked out in such a manner that the bank covers a fair return as well as the actual cost of the goods on full payment

(5)DEVLOPMENT CHARGES.THE BANKS ADVANCES TO THE CUSTOMER FOR THE DEVLOPMENT OF LAND OR PROPERTY THEN RECIVE SHARES IN THE VALUE ADDED TO THE PROPERTY.THIS SHARE IN VALUE OD ADDED TO THE DEVLOPED PROPERTY IS NAMED AS DEVLOPMENT CHARGES

3.INVESTMENT MODE OF FINANCING 1.Musharakah' is a word of Arabic origin which literally means sharing. In the context of business and trade it means a joint enterprise in which all the partners share the profit or loss of the joint venture 2.MUDARBAH; Mudarabah (the Islamic way, or PLS). The two persons co-operate with each other on the basis of partnership, where the capital-owner provides the capital and the other party puts his management skills into the business. 3,PARTICIPATION TERM CERTIFICATE IT IS AN INSTRUMENT OF MEDIUM AND LONG TERM FINANCING.THESE CERTIFICATES ARE ISSUED BY A COMPANY TO A SCHEDULE BANK AND FINANCIAL INSITITUION FOR RAISING FUNDS.THE PROFIT AND LOSSES ARE SHARED ACCORDING TO AGREED RATIO.PTC IS INTRODUCED TO REPLACE THE INTREST BEARING DEBENTURES 4.INVESTMENT ON RENT SHARING FINANCING UNDER RENT SHARING ARRANGEMENT IS PROVIDED BY HOUSE BUILDING FINANCE CORPORATION AND COMMERCIAL BANKS.THIS MODE OF FINANCE IS APPLICABLE FOR THE PURCHASE OF HOUSE,PLAZA ETC… 5;EQUITY PARTICIPATION.

A type of loan wherein the creditor has the right to obtain ownership interest in the project to be financed. An equity participation loan induces the creditor to lend because of ownership right. When the project to be financed produces revenue, the creditor will also share in the profit. — Preceding unsigned comment added by Sweety dolly11111 (talkcontribs) 11:32, 10 April 2012 (UTC)

clarity in lede[edit]

Not sure about this part of the lede:

... Sharia prohibits the fixed or floating payment or acceptance of specific interest or fees (known as riba, or usury) for loans of money. Investing in businesses that provide goods or services considered contrary to Islamic principles is also haraam ("sinful and prohibited"). Although these principles have been applied in varying degrees by historical Islamic economies due to lack of Islamic practice, only in the late 20th century were a number of Islamic banks formed to apply these principles to private or semi-private commercial institutions within the Muslim community.[2][3]

These parts seem confusing
these principles (i.e. prohibiting interest or fees for loans, and prohibiting Investment in businesses that provide alcohol or pork, etc.) have been applied in varying degrees by historical Islamic economies due to lack of Islamic practice.


Wouldn't prohibiting haaram activities be due to Islamic behavior, not lack of it??? --BoogaLouie (talk) 15:34, 27 March 2014 (UTC)

Proposed rewrite:
... Sharia prohibits acceptance of specific interest or fees for loans of money (known as riba, or usury), whether the payment is fixed or floating. Investment in businesses that provide goods or services considered contrary to Islamic principles (e.g. pork or alcohol) is also haraam ("sinful and prohibited"). Although these principles have been applied historically in Muslim countries to varying degrees, only in the late 20th century were a number of Islamic banks formed to apply these principles to private or semi-private commercial institutions within the Muslim community.[2][3] -BoogaLouie (talk) 15:34, 27 March 2014 (UTC)

alternative rewrite:
... Sharia prohibits acceptance of specific interest or fees for loans of money (known as riba, or usury), whether the payment is fixed or floating. Investment in businesses that provide goods or services considered contrary to Islamic principles (e.g. pork or alcohol) is also haraam ("sinful and prohibited"). Although these prohibitions have been applied historically in Muslim countries to varying degrees, to prevent unIslamic practice, only in the late 20th century were a number of Islamic banks formed to apply these principles to private or semi-private commercial institutions within the Muslim community.[2][3] -BoogaLouie (talk) 15:34, 27 March 2014 (UTC)

Proposing rather being bold because I wanted to get some 2nd opinions --BoogaLouie (talk) 17:04, 27 March 2014 (UTC)