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Articles on Islamic Finance
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aamirsaab
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Re: Islamic Finance News
Interesting read indeed.
The course I am currently doing is actually very critical about modern islamic finance (if you can call it islamic that is), so news like this isn't rare to come by.
Still, interesting nonetheless. And only highlights the importance of muslim economicists. I'm not feeling down by this, rather I enjoy it: there's so much room for growth and improvement - can't wait to get stuck in!
Uthmān;1253767 said:
Interesting read indeed.
The course I am currently doing is actually very critical about modern islamic finance (if you can call it islamic that is), so news like this isn't rare to come by.
Still, interesting nonetheless. And only highlights the importance of muslim economicists. I'm not feeling down by this, rather I enjoy it: there's so much room for growth and improvement - can't wait to get stuck in!
Uthman
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aamirsaab
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Hehehe. Ideally, the islamic banks could work without interest (for the most part), The reality is most of them actually charge interest (but they will call it something else, like transaction fee or something. I referred to this earlier as back-door interest). There are Islamic banks that don't charge it (hidden or not) but because of how widespread interest is, globally, they will be affected by it in their day-to-day business.
There is actually a massive debate going on as to whether we can have an Islamic bank at all. Not neccessarily because of interest (or lack thereof) but also because a lot of the products are based on caravan-era trading. A bank is a lot of things but it's not really a caravan-era trader.
For instance, mudarabah (limited partnership) and murabaha (unlimited partnership) - they work very well in 1 to 1, face-to-face transactions (they'd probably be better suited to corporate banking now that I think about it). But (commercial) banks, like Natwest/HSBC etc don't operate on a 1 to 1 basis (certainly not face-to-face anyway), so they suffer from a lot of information problems (lemon or principle-agent problems).
And, as a member stated earlier in a conversation between him and myself a few pages back, we shouldn't put each other (especially fellow muslims) into the way of harm via loans/debts etc.
So it's difficult to fully say if Islamic banks should exist or not; on the one hand, there is a need for halaal banking (muslims need to put their money somewhere!) but on the other, can banks, as it is (a financial intermediary operating successfully in it's own industry) be even considered halaal in the first place?
It's mind-boggling stuff. And will make for an excellent dissertation!
Edit: that BBC news article a few posts up is absolutely spot on. Our lecturers (one of them a Sheik who is on a sharia advisory board!) have been telling us all that information throughout this year. It also ties in with the debate surrounding Islamic banking. It's very interesting and unfortunate but at the same time to be expected: Islamic banking has only been around for a short time (30 odd years now....) so there are still teething problems, but through time should ease itself out. It's unfortunate and sad, however, that scholars are being bought....
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Insaanah
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This article really will make me think twice about Islamic finance. And I found the bit about the scholars highly disturbing....
In the Prophet sallallaahu alaihi wa sallams time, (if I'm right) if someone had a loan, they just paid it back. There was never any intention of that becoming an opportunity for someone to make money. I wander if their houses were paid in cash in full? And those who couldn't afford it rented? I wander if anyone has any information on that?
And murabaha and musharaka and the like..are they principles from the time of the Prophet sallallaahu alihi wa sallam, mentioned in the ahadeeth?
Jazaakallah khair.
aamirsaab
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This article really will make me think twice about Islamic finance. And I found the bit about the scholars highly disturbing....
In the Prophet sallallaahu alaihi wa sallams time, (if I'm right) if someone had a loan, they just paid it back. There was never any intention of that becoming an opportunity for someone to make money. I wander if their houses were paid in cash in full? And those who couldn't afford it rented? I wander if anyone has any information on that?
I'll ask my lecturers next week about that. If memory serves correct, ijaraha and salam were used to facilitate those sorts of transactions. Though I'm not completely sure on that - I'll check next week.
I believe the Prophet himself did actually use mudarabah with his wife Khadijah (I can't remember 100% tho) in business matters - she would provide the money and he would provide the know-how. Murabaha is an evolution of mudarabah but I can't remember if it was used in Prophet's time.And murabaha and musharaka and the like..are they principles from the time of the Prophet sallallaahu alihi wa sallam, mentioned in the ahadeeth?
Jazaakallah khair.
Musharakah was probably used at that time tho, since it's selling at mark up (or cost-plus) - it's pretty basic concept of business, so I'm pretty sure it was done at that time.
I should add on to my last post: majority of conventional banking is regarded as halaal (and available in Islamic banks) - like 90%. The last 10% is to do with debt financing (which is haram). So in that regard, Islamic banking is better for muslims as you're only getting halaal products.
But, given the information we have (back-door interest, bribary of scholars etc), it's difficult to tell the real difference between sharia and non-sharia compliant banking - I wouldn't be able to say XYZ islamic bank is more halaal than Natwest or HSBC for instance because of the problems already highlighted.
Again tho, (and you'll hear this a lot) to be expected: islamic banking is still in growth stage.
p.s: If you guys/gals (muslim or not) have any questions regarding Islamic banking, please do ask them here. If I cannot answer them (yes, there is a limit to my awesomeness
), my teachers can.
Insaanah
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Jazaakallah khair. I'd be really interested to know. If you find anything out, please do post it here.
I believe the Prophet himself did actually use mudarabah with his wife Khadijah (I can't remember 100% tho) in business matters - she would provide the money and he would provide the know-how. Murabaha is an evolution of mudarabah but I can't remember if it was used in Prophet's time.
Musharakah was probably used at that time tho, since it's selling at mark up (or cost-plus) - it's pretty basic concept of business, so I'm pretty sure it was done at that time.
I should add on to my last post: majority of conventional banking is regarded as halaal (and available in Islamic banks) - like 90%. The last 10% is to do with debt financing (which is haram). So in that regard, Islamic banking is better for muslims as you're only getting halaal products.
But, given the information we have (back-door interest, bribary of scholars etc), it's difficult to tell the real difference between sharia and non-sharia compliant banking - I wouldn't be able to say XYZ islamic bank is more halaal than Natwest or HSBC for instance because of the problems already highlighted.
Again tho, (and you'll hear this a lot) to be expected: islamic banking is still in growth stage.
p.s: If you guys/gals (muslim or not) have any questions regarding Islamic banking, please do ask them here. If I cannot answer them (yes, there is a limit to my awesomeness
Jazaakallah khair.
Uthman
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I think it has a potential to improve standards. Here some have tried to come up with the solution by pooling of funds. A bank has funds/share in set of businesses that they know well, and then they give share to depositor in the savings account. It works similar to mutual fund, and fund manager in the bank tries to make a well balanced portfolio. But the concerns people have shown are that they don't know much about the business prospects, operations/practices, and management that their money is invested in. This is a valid concern, and trying resolving it would mean better sharing of knowledge and rating about revenue/risk models of the businesses, screening process, and transparency regarding the management and their operations/practices. This would be very beneficial for the industries across the board (but most importantly for banking and finance industry).
Another issue facing Islamic finance is the fiat inflation which was not there at the time of Prophet (pbuh) due to the use of gold and silver as currency. I'll try to find a chart, but in early 1900s when there was gold standard, I saw a chart that showed the value of money didn't dilute like it does today with fiat for 20 years. chart was about 20 years. So basically, it showed that money value moved up and down slightly, but on average even for 20 years it was almost same. So somebody lending 10 million would get back approx 10 million in real value even after 20 years. But with fiat lets say losing 2.5% each year on average for 20 years, means it would lose about 50% of the value.
Here is more accurate figure from http://www.westegg.com/inflation/
10 million initial money in 1988. Returned in 2008 which makes it 20 years. After 20 years, its purchasing power comes down to $5,547,348.18. That is about 45% loss in 20 years and these figures are real. So person lending $10million in fiat will get back only $5.5million in real value if borrower only gives back $10 million back in fiat after 20 years.
These two are very important issues in modern finance and how Islamic finance will impact these two issues rarely comes up in discussions.
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Uthman
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Are Islamic banks safe for home buyers and investors?
• No interest rates and derivatives under sharia
• London is a world centre of Islamic finance
Did you know that it is possible to take on an interest-free home loan? Do you believe that your investments should follow ethical principles? This is possible through the financial structures that follow the Islamic law.
Thousand of people, Muslim and not, have already turned away from their traditional banks to join the Islamic banking system. According to the University of Salford, that has just launched a new masters course in Islamic banking, the Islamic finance sector has an estimated growth rate of 10% to 15% a year, with about $500bn of assets under management.
Islamic finance is based on principles of the Islamic law, the shariah. Major principles of it are a ban on interest rates and contractual uncertainty, adherence to risk-sharing and profit- sharing, promotion of ethical investments that enhance society, and asset-backing. Following the Quranic verse: “Allah made legal commerce, and illegal interest,” Islamic law prohibits usury, known as riba. Making money by lending is considered immoral because the borrower bears the entire risk, while the lender has a guaranteed profit.
Leveraged investments are not allowed. Investments in business that deal in arms, alcohol, gambling, pornography and pork are excluded.
Islamic forms of real estate
Islamic banks therefore offer other forms of real estate that respect the sharia.
A possibility is, for example, that the bank buys the house and then resells it at fixed monthly rates to the customer. Another option is the so-called lease-to-own contract similar to the car purchase: the customer pays for the house “rent”, and at the end of the runtime, it belongs to him.
The third alternative is a kind of shared “take over” of the bank and the customer. The bank will resell gradually to the costumer its shares of the property.
Success of the Islamic finance
The boom in Islamic banking has several reasons. On the one hand the industry is young – so the growth is natural. On the other hand it depends on the credit crisis. Volatile interest rates, high bank fees and foreclosure in payment defaults make people unhappy of the traditional banking system.
Islamic banks are popular especially among young Muslims. Muslims in the UK are 3% of the population and Islam is the second largest religious group in the United Kingdom. In the pre-crisis scenario only a few of them could afford to buy a home. But since the beginning of the crisis house prices fell dramatically – by 18%, says Tony Key, professor at the Cass Business School and expert in housing market. This makes it easier to pay off a property. It seems to be the right moment to buy.
Internationally, Islamic banks appear to be more resilient to the global economic turndown and international financial crisis than conventional banks. Although the Islamic bankers invented tricks to defeat the religious rules getting closer to the western finance, they tend to avoid speculative investments, such as derivatives, that –according to many analysts- affected conventional banks in the financial crisis.
According to the Moscow Times, there are several ingredients that contribute to the success of Islamic finance in London. Essential ones are a regulatory framework that can accommodate financial principles and a clear willingness of the government to promote Islamic finance.
The UK government has fully supported the sector since the early 1990s. The situation is very different in France, where there is a debate on regulating the activities of Islamic finance. Some members of the French government are in opposition to it because they think that this would contravene the principle of secularity of the state.
Warning of “misleading advertising”
The boom in Islamic banking is in contrast to the global decline of the credit market. Thus, the number of loans in the UK has declined to the lowest level since 1975 and increases with fatigue, despite the policy of quantitative easing.
In this sense, Islamic banks go against the grain.
But critics complain that the financial models of institutes in the end turn up to the equivalent of a classic way of credit: the customer needs periodic payments, while the bank makes a profit. Moreover, other critics state that “the industry uses the religious insecurity of the people.” “Companies sell a product, which they claim that it was unlike other products, although it is not. This is misleading advertising,” said Mahmoud Amin el-Gamal, an economics professor at Rice University and Specialist in Islamic finance, in an interview with The Washington Post.
Islamic finance remains a drop in the ocean of finance. Most of its funds are situated in the Persian Gulf and 20% in South Asia but they are increasing in the Western world, where Muslims are a minority.
As the hyper-rich club of oil exporters in the Gulf region just announced that it will create a petro currency on their own to replace the US dollars, the influence of Islamic finance on the global market is set to increase.
Source: The City Herald - City University London
• No interest rates and derivatives under sharia
• London is a world centre of Islamic finance
Did you know that it is possible to take on an interest-free home loan? Do you believe that your investments should follow ethical principles? This is possible through the financial structures that follow the Islamic law.
Thousand of people, Muslim and not, have already turned away from their traditional banks to join the Islamic banking system. According to the University of Salford, that has just launched a new masters course in Islamic banking, the Islamic finance sector has an estimated growth rate of 10% to 15% a year, with about $500bn of assets under management.
Islamic finance is based on principles of the Islamic law, the shariah. Major principles of it are a ban on interest rates and contractual uncertainty, adherence to risk-sharing and profit- sharing, promotion of ethical investments that enhance society, and asset-backing. Following the Quranic verse: “Allah made legal commerce, and illegal interest,” Islamic law prohibits usury, known as riba. Making money by lending is considered immoral because the borrower bears the entire risk, while the lender has a guaranteed profit.
Leveraged investments are not allowed. Investments in business that deal in arms, alcohol, gambling, pornography and pork are excluded.
Islamic forms of real estate
Islamic banks therefore offer other forms of real estate that respect the sharia.
A possibility is, for example, that the bank buys the house and then resells it at fixed monthly rates to the customer. Another option is the so-called lease-to-own contract similar to the car purchase: the customer pays for the house “rent”, and at the end of the runtime, it belongs to him.
The third alternative is a kind of shared “take over” of the bank and the customer. The bank will resell gradually to the costumer its shares of the property.
Success of the Islamic finance
The boom in Islamic banking has several reasons. On the one hand the industry is young – so the growth is natural. On the other hand it depends on the credit crisis. Volatile interest rates, high bank fees and foreclosure in payment defaults make people unhappy of the traditional banking system.
Islamic banks are popular especially among young Muslims. Muslims in the UK are 3% of the population and Islam is the second largest religious group in the United Kingdom. In the pre-crisis scenario only a few of them could afford to buy a home. But since the beginning of the crisis house prices fell dramatically – by 18%, says Tony Key, professor at the Cass Business School and expert in housing market. This makes it easier to pay off a property. It seems to be the right moment to buy.
Internationally, Islamic banks appear to be more resilient to the global economic turndown and international financial crisis than conventional banks. Although the Islamic bankers invented tricks to defeat the religious rules getting closer to the western finance, they tend to avoid speculative investments, such as derivatives, that –according to many analysts- affected conventional banks in the financial crisis.
According to the Moscow Times, there are several ingredients that contribute to the success of Islamic finance in London. Essential ones are a regulatory framework that can accommodate financial principles and a clear willingness of the government to promote Islamic finance.
The UK government has fully supported the sector since the early 1990s. The situation is very different in France, where there is a debate on regulating the activities of Islamic finance. Some members of the French government are in opposition to it because they think that this would contravene the principle of secularity of the state.
Warning of “misleading advertising”
The boom in Islamic banking is in contrast to the global decline of the credit market. Thus, the number of loans in the UK has declined to the lowest level since 1975 and increases with fatigue, despite the policy of quantitative easing.
In this sense, Islamic banks go against the grain.
But critics complain that the financial models of institutes in the end turn up to the equivalent of a classic way of credit: the customer needs periodic payments, while the bank makes a profit. Moreover, other critics state that “the industry uses the religious insecurity of the people.” “Companies sell a product, which they claim that it was unlike other products, although it is not. This is misleading advertising,” said Mahmoud Amin el-Gamal, an economics professor at Rice University and Specialist in Islamic finance, in an interview with The Washington Post.
Islamic finance remains a drop in the ocean of finance. Most of its funds are situated in the Persian Gulf and 20% in South Asia but they are increasing in the Western world, where Muslims are a minority.
As the hyper-rich club of oil exporters in the Gulf region just announced that it will create a petro currency on their own to replace the US dollars, the influence of Islamic finance on the global market is set to increase.
Source: The City Herald - City University London
http://www.youtube.com/watch?v=UHFaQDqVZk8
In the Q and A the woman actually explains the history of Islamic finance and does a bit of dawah lol.
In the Q and A the woman actually explains the history of Islamic finance and does a bit of dawah lol.
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Wolf in sheep's clothing - Devastating impact of interest and the torturous nature of
One of the toughest lessons that we have had to learn in this decade has been the financial system collapse, and the collapse of many of the major banks of the world. The five major private and institutional banks have now become either commercial banks, including UBS and Goldman Sachs, or have become a victim to the current economic system, like Lehman Brothers and Bear Sterns. Smaller commercial banks have also been a casualty of the current economic system with banks like RBS and Northern Rock throwing in the towel and numerous banking institutions globally needing government funding to stay afloat.
Regulation around banking are becoming tighter and tighter and more banks have to implement government oversight. In the case of Islamic banking more and more banks are following the same example as has been set by traditional banks. Where the supply of money is based on fractional banking.
Lets take a look at what fractional banking exactly is. Fractional banking means using a multiplier of the deposits to give out loans. For example, in the real world a person would only be able give to other people as much money as he would have. If you had £100 you would be able to give someone £100. However in fractional banking you only have to keep 10% of the amount of loans you make. Thus, if you had £100 you would be able to lend out £1,000 based on the calculation that your total loans are £1,000 and 10% of these is £100 which you physically have.
Because of this fractional banking system you are always able to lend out more money than you actually have. Which allows more and more people credit. If the bank default’s as was the case for Lehman Bros, Bear Sterns and Northern Rock the depositors only get pennies on the dollar. Since the depositor is not entitled in the decision-making process of lending, effectively the bank has looted the wealth of the depositors.
In the true Islamic monetary and economic system, the bank would function as a trust. Where the amount of money deposited in the bank would be a trust for the bank. An 'amanah' so to speak. The bank would only be able to lend out as much money as it owned or was deposited to the bank in terms of partnership money. Only the portion of the money deposited in the bank as partnership money would be used for partnership loans.
This would imply that people could deposit the money in the bank with the knowledge of getting the same amount of the money back. In the absence of a zero interest rate economy that seems extraordinary. It almost seems that depositing money to the bank would be a lost cause because of devaluation. However, because we are living in an economy which is stuck with interest, we are unable to understand how this would be beneficial.
Before going forward let us look at what interest really is. Interest is a fee paid on borrowed assets. It is the price paid for the use of borrowed money, or, money earned by deposited funds. As this concept of money is considered we understand that all money should have a fee on it's usage, however Allah says that He will destroy riba. The explanation of which is given as follows;
“Ibn Jarir said that Allah's statement, (Allah will destroy Riba) is similar to the statement reported of `Abdullah bin Mas`ud, "Riba will end up with less, even if it was substantial.'' Imam Ahmad recorded a similar statement in Al-Musnad” . (Ibn Kathir)
Surprisingly most of us don't understand what it means, that interest even though it maybe substantial, will be less. The answer lies in the simple mathematical equation. On 5% annual interest £100 will be equal to £105 in a year. However, all things being equal, this implies that tomorrow's £100 will not be equal to today's £100. In fact tomorrow's £100 will be equally to only £95 of today. Since nothing else has changed there is no reason that the money should increase. It is infect decreasing. Because of the interest in tomorrow's money the £100 are only equal to £95 today. The intrinsic value of £100 pounds has actually decreased due to the element of interest which has been incorporated. Over time this value will keep decreasing and decreasing until the £100 become equal to almost nothing. This is what we see due to the current economic system. Goods that could be purchased for a few cents a decade ago cost hundreds, though the intrinsic value has not changed, e.g. a loaf of bread, or a can of coke.
The fractional banking system multiplies this problem by a factor of 10 increasing the problem of devaluation of the actual intrinsic value of money.
The solution then is two fold, first zero interest based banking and second the role of the bank as a trustee first and foremost and then a partner with the depositors to invest in beneficial enterprises.
In our next article we will discuss how these principles can be adopted easily on an individual basis without any changes to the current economic system.
One of the toughest lessons that we have had to learn in this decade has been the financial system collapse, and the collapse of many of the major banks of the world. The five major private and institutional banks have now become either commercial banks, including UBS and Goldman Sachs, or have become a victim to the current economic system, like Lehman Brothers and Bear Sterns. Smaller commercial banks have also been a casualty of the current economic system with banks like RBS and Northern Rock throwing in the towel and numerous banking institutions globally needing government funding to stay afloat.
Regulation around banking are becoming tighter and tighter and more banks have to implement government oversight. In the case of Islamic banking more and more banks are following the same example as has been set by traditional banks. Where the supply of money is based on fractional banking.
Lets take a look at what fractional banking exactly is. Fractional banking means using a multiplier of the deposits to give out loans. For example, in the real world a person would only be able give to other people as much money as he would have. If you had £100 you would be able to give someone £100. However in fractional banking you only have to keep 10% of the amount of loans you make. Thus, if you had £100 you would be able to lend out £1,000 based on the calculation that your total loans are £1,000 and 10% of these is £100 which you physically have.
Because of this fractional banking system you are always able to lend out more money than you actually have. Which allows more and more people credit. If the bank default’s as was the case for Lehman Bros, Bear Sterns and Northern Rock the depositors only get pennies on the dollar. Since the depositor is not entitled in the decision-making process of lending, effectively the bank has looted the wealth of the depositors.
In the true Islamic monetary and economic system, the bank would function as a trust. Where the amount of money deposited in the bank would be a trust for the bank. An 'amanah' so to speak. The bank would only be able to lend out as much money as it owned or was deposited to the bank in terms of partnership money. Only the portion of the money deposited in the bank as partnership money would be used for partnership loans.
This would imply that people could deposit the money in the bank with the knowledge of getting the same amount of the money back. In the absence of a zero interest rate economy that seems extraordinary. It almost seems that depositing money to the bank would be a lost cause because of devaluation. However, because we are living in an economy which is stuck with interest, we are unable to understand how this would be beneficial.
Before going forward let us look at what interest really is. Interest is a fee paid on borrowed assets. It is the price paid for the use of borrowed money, or, money earned by deposited funds. As this concept of money is considered we understand that all money should have a fee on it's usage, however Allah says that He will destroy riba. The explanation of which is given as follows;
“Ibn Jarir said that Allah's statement, (Allah will destroy Riba) is similar to the statement reported of `Abdullah bin Mas`ud, "Riba will end up with less, even if it was substantial.'' Imam Ahmad recorded a similar statement in Al-Musnad” . (Ibn Kathir)
Surprisingly most of us don't understand what it means, that interest even though it maybe substantial, will be less. The answer lies in the simple mathematical equation. On 5% annual interest £100 will be equal to £105 in a year. However, all things being equal, this implies that tomorrow's £100 will not be equal to today's £100. In fact tomorrow's £100 will be equally to only £95 of today. Since nothing else has changed there is no reason that the money should increase. It is infect decreasing. Because of the interest in tomorrow's money the £100 are only equal to £95 today. The intrinsic value of £100 pounds has actually decreased due to the element of interest which has been incorporated. Over time this value will keep decreasing and decreasing until the £100 become equal to almost nothing. This is what we see due to the current economic system. Goods that could be purchased for a few cents a decade ago cost hundreds, though the intrinsic value has not changed, e.g. a loaf of bread, or a can of coke.
The fractional banking system multiplies this problem by a factor of 10 increasing the problem of devaluation of the actual intrinsic value of money.
The solution then is two fold, first zero interest based banking and second the role of the bank as a trustee first and foremost and then a partner with the depositors to invest in beneficial enterprises.
In our next article we will discuss how these principles can be adopted easily on an individual basis without any changes to the current economic system.
Uthman
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Emergency Status (Dharurah) and Islamic banks
By
Zaharuddin Abd Rahman
www.zaharuddin.net
( This article is an excerpt from my book "money, you and Islam" which can be purchased at this link )
emergency.gif
"If a person was lost for days in the thick forest without eating and may die, could he consume a pig due to desperation (dharurat)?" I asked the participants in an Islamic finance seminar.
"Yes, he could," answered the participants confidently.
"Wrong" I replied, creating confusion.
"This is because other options are still exist in the forest to ease his hunger such as snails, worms, plants, fruits and so on, which are far better than a pig. That should be prioritized rather than consuming the pig," I argued.
"Thus there is no dharurat at that time, and it is not permissible for the man to consume the pig just because it is tastier, more appetizing and fatter than worms" I said firmly, inviting laughter from participants.
The same situation applies to Islamic banking in Malaysia. Muslims should give priority to Islamic banking although it looks less ‘appetizing' and causes additional difficulties as compared to riba based institutions. Muslims cannot use dharurat as an excuse to use the facilities of conventional banks.
As mentioned:
"Verily what is allowed due to emergency (dharurat) requires a certainty that the emergency occurred after every effort of searching (for what is permitted)." (Syarhul Umdah, 1/426)
The example above is to indicate that the argument of emergency for using conventional banks and insurance in Malaysia these days is totally unacceptable since there are Islamic banks, Islamic banking windows and takaful. The excuse that the price in conventional banks is cheaper should not be used as it is similar to the lost and starving person who saw a chicken (that is permitted) but consumed a pig just because he desired it. The only exception is when all Islamic institutions have rejected your application. Remember the Islamic Legal Maxims that reads:
Meaning: "What is permissible due to dharurat is limited to a certain limit." (As-Ashbah Wa An-Nazair, As-Suyuti, 1/82; Hawashi Asy-Syarwani, 3/272)
Consider the following scenarios:
In a secluded village where clean drinking water is scarce, two sellers approach the villagers with the following offer:
Seller A: Offering 1 liter of cheap liquor at only RM0.50 a bottle.
Seller B: Offering 1 liter of cheap orange juice at only RM1.00 a bottle.
Who do you think, in the above scenario, is inconsiderate and malicious? If your answer is B ( because selling orange in higher price than liqour), YOU MIGHT NEED TO RETHINK AND RECHECK your level of belief and taqwa, it might be at a worrying stage. Why?
It shows that the person make the visible and material element i.e price as a more important than the spiritual element i.e the prohibition of liquor.
To me, there is nothing more malicious and cruel than offering liquor that is prohibited, and at a cheap price that attracts people to do the prohibited.
Do not reprimand seller B for selling at a higher price, as we do not know his capital and cost to obtain the oranges. He also wants to profit while offering a permitted drink.
You say, "True, but seller B should be more considerate and sacrifice to save a lot of people from being attracted to what is prohibited". I believe it depends on the ihsan and belief of seller B but what he did was permissible. It depends on the owner. Therefore, if the owner of an Islamic bank is unable to give discounts, other owners may not be able to do so as well.
Finally, we should be fair in evaluating Islamic banks and not hastily accusing them as malicious when they are actually saving the Muslim ummah from falling into the trap of riba-based conventional banks.
Best regards,
Zaharuddin Abd Rahman
www.zaharuddin.net
By
Zaharuddin Abd Rahman
www.zaharuddin.net
( This article is an excerpt from my book "money, you and Islam" which can be purchased at this link )
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"If a person was lost for days in the thick forest without eating and may die, could he consume a pig due to desperation (dharurat)?" I asked the participants in an Islamic finance seminar.
"Yes, he could," answered the participants confidently.
"Wrong" I replied, creating confusion.
"This is because other options are still exist in the forest to ease his hunger such as snails, worms, plants, fruits and so on, which are far better than a pig. That should be prioritized rather than consuming the pig," I argued.
"Thus there is no dharurat at that time, and it is not permissible for the man to consume the pig just because it is tastier, more appetizing and fatter than worms" I said firmly, inviting laughter from participants.
The same situation applies to Islamic banking in Malaysia. Muslims should give priority to Islamic banking although it looks less ‘appetizing' and causes additional difficulties as compared to riba based institutions. Muslims cannot use dharurat as an excuse to use the facilities of conventional banks.
As mentioned:
"Verily what is allowed due to emergency (dharurat) requires a certainty that the emergency occurred after every effort of searching (for what is permitted)." (Syarhul Umdah, 1/426)
The example above is to indicate that the argument of emergency for using conventional banks and insurance in Malaysia these days is totally unacceptable since there are Islamic banks, Islamic banking windows and takaful. The excuse that the price in conventional banks is cheaper should not be used as it is similar to the lost and starving person who saw a chicken (that is permitted) but consumed a pig just because he desired it. The only exception is when all Islamic institutions have rejected your application. Remember the Islamic Legal Maxims that reads:
Meaning: "What is permissible due to dharurat is limited to a certain limit." (As-Ashbah Wa An-Nazair, As-Suyuti, 1/82; Hawashi Asy-Syarwani, 3/272)
Consider the following scenarios:
In a secluded village where clean drinking water is scarce, two sellers approach the villagers with the following offer:
Seller A: Offering 1 liter of cheap liquor at only RM0.50 a bottle.
Seller B: Offering 1 liter of cheap orange juice at only RM1.00 a bottle.
Who do you think, in the above scenario, is inconsiderate and malicious? If your answer is B ( because selling orange in higher price than liqour), YOU MIGHT NEED TO RETHINK AND RECHECK your level of belief and taqwa, it might be at a worrying stage. Why?
It shows that the person make the visible and material element i.e price as a more important than the spiritual element i.e the prohibition of liquor.
To me, there is nothing more malicious and cruel than offering liquor that is prohibited, and at a cheap price that attracts people to do the prohibited.
Do not reprimand seller B for selling at a higher price, as we do not know his capital and cost to obtain the oranges. He also wants to profit while offering a permitted drink.
You say, "True, but seller B should be more considerate and sacrifice to save a lot of people from being attracted to what is prohibited". I believe it depends on the ihsan and belief of seller B but what he did was permissible. It depends on the owner. Therefore, if the owner of an Islamic bank is unable to give discounts, other owners may not be able to do so as well.
Finally, we should be fair in evaluating Islamic banks and not hastily accusing them as malicious when they are actually saving the Muslim ummah from falling into the trap of riba-based conventional banks.
Best regards,
Zaharuddin Abd Rahman
www.zaharuddin.net
Uthman
LI News Service
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