lightofnur
Junior Member
Assalammualaikum all.
During this month, I engaged with a Christian on a discussion on Islam, and so far everything has been in amicable terms. We had been discussing faith and certain 'controversial' aspects of Islam, and everything has been going on great. This person has respect and when discussing he doesn't throw insults.
However, as we discussed this (through email), we came on the subject of Islamic finance. I do know basics of Islamic finance, but I however, am not too knowledgeable on the subject, I have to admit. I do know that Islam prohibits riba, though, which is his main question. Since he wants to know more, I have gone through some information on it, and provided him a wiki on Islamic finance.
http://en.wikipedia.org/wiki/Islamic_banking
He, however, questioned the a part on the history section, saying:
"Taking part in the budget debate, M.P. Bhindara, a minority MNA [Member of the National Assembly]...referred to a decree by an Al-Azhar University's scholar that bank interest was not un-Islamic. He said without interest the country could not get foreign loans and could not achieve the desired progress. A pandemonium broke out in the house over his remarks as a number of MMA members...rose from their seats in protest and tried to respond to Mr Bhindara's observations. However, they were not allowed to speak on a point of order that led to their walkout.... Later, the opposition members were persuaded by a team of ministers...to return to the house...the government team accepted the right of the MMA to respond to the minority member's remarks.... Sahibzada Fazal Karim said the Council of Islamic ideology had decreed that interest in all its forms was haram in an Islamic society. Hence, he said, no member had the right to negate this settled issue.[40]
Some Islamic banks charge for the time value of money, the common economic definition of Interest (Riba). These institutions are criticized in some quarters of the Muslim community for their lack of strict adherence to Sharia.
The concept of Ijarah is used by some Islamic Banks (the Islami Bank in Bangladesh, for example) to apply to the use of money instead of the more accepted application of supplying goods or services using money as a vehicle. A fixed fee is added to the amount of the loan that must be paid to the bank regardless if the loan generates a return on investment or not. The reasoning is that if the amount owed does not change over time, it is profit and not interest and therefore acceptable under Sharia.
Islamic banks are also criticized by some for not applying the principle of Mudarabah in an acceptable manner. Where Mudarabah stresses the sharing of risk, critics point out that these banks are eager to take part in profit-sharing but they have little tolerance for risk. To some in the Muslim community, these banks may be conforming to the strict legal interpretations of Sharia but avoid recognizing the intent that made the law necessary in the first place.[citation needed]
The majority of Islamic banking clients are found in the Gulf states and in developed countries. With 60% of Muslims living in poverty, Islamic banking is of little benefit to the general population. The majority of financial institutions that offer Islamic banking services are majority owned by Non-Muslims. With Muslims working within these organizations being employed in the marketing of these services and having little input into the actual day to day management, the veracity of these institutions and their services are viewed with suspicion. One Malaysian Bank offering Islamic based investment funds was found to have the majority of these funds invested in the gaming industry; the managers administering these funds were non Muslim.[40] These types of stories contribute to the general impression within the Muslim populace that Islamic banking is simply another means for banks to increase profits through growth of deposits and that only the rich derive benefits from implementation of Islamic Banking principles."
I am not sure how to reply to this, as I am weak on this matter.
He further elaborated his question:
"Money is a utility, Interest is the cost of borrowing money. The way it works in the West, A person goes to a bank to get a loan, He thinks the bank is giving him the loan, but it's not. The money is created at a central bank of the country. The central bank Lends the money to the person's bank at interest and the person's bank lends it to the person for a little more interest. And if all Loans were to be payed off there would be no money left it all belongs to the central banks of the world. The funny thing is that they just create the money out of thin air only because there is a demand. And where does this new money find its value? It finds it from the old money. Thats why the price of goods go up. What makes up an interest rate? Profit,Administration Fees,Default Loans, Taxes. Default loans is the biggest contributor to an interest rate. Banks love low interest rates, they lend out more money with less default loans, but if to much money is created, the money losses value to quickly. Then the government steps in and tells the Central Bank to raise the interest rate. Loans slow down. Existing money gains value. I don't understand why Islam has a problem with this,"
And:
"What would be the trigger for a central Islamic bank to print more money ?Without gold to back it up,or a resource, other currencies. DEBT-FREE MONEY. Low or high the money in the Islamic banks was created from interest,"
So I am in a bit of confusion here myself. Any ideas on how to answer? Is anyone knowldgeable on this subject? If so, please do help me give a reply. I am eager to learn myself.
During this month, I engaged with a Christian on a discussion on Islam, and so far everything has been in amicable terms. We had been discussing faith and certain 'controversial' aspects of Islam, and everything has been going on great. This person has respect and when discussing he doesn't throw insults.
However, as we discussed this (through email), we came on the subject of Islamic finance. I do know basics of Islamic finance, but I however, am not too knowledgeable on the subject, I have to admit. I do know that Islam prohibits riba, though, which is his main question. Since he wants to know more, I have gone through some information on it, and provided him a wiki on Islamic finance.
http://en.wikipedia.org/wiki/Islamic_banking
He, however, questioned the a part on the history section, saying:
"Taking part in the budget debate, M.P. Bhindara, a minority MNA [Member of the National Assembly]...referred to a decree by an Al-Azhar University's scholar that bank interest was not un-Islamic. He said without interest the country could not get foreign loans and could not achieve the desired progress. A pandemonium broke out in the house over his remarks as a number of MMA members...rose from their seats in protest and tried to respond to Mr Bhindara's observations. However, they were not allowed to speak on a point of order that led to their walkout.... Later, the opposition members were persuaded by a team of ministers...to return to the house...the government team accepted the right of the MMA to respond to the minority member's remarks.... Sahibzada Fazal Karim said the Council of Islamic ideology had decreed that interest in all its forms was haram in an Islamic society. Hence, he said, no member had the right to negate this settled issue.[40]
Some Islamic banks charge for the time value of money, the common economic definition of Interest (Riba). These institutions are criticized in some quarters of the Muslim community for their lack of strict adherence to Sharia.
The concept of Ijarah is used by some Islamic Banks (the Islami Bank in Bangladesh, for example) to apply to the use of money instead of the more accepted application of supplying goods or services using money as a vehicle. A fixed fee is added to the amount of the loan that must be paid to the bank regardless if the loan generates a return on investment or not. The reasoning is that if the amount owed does not change over time, it is profit and not interest and therefore acceptable under Sharia.
Islamic banks are also criticized by some for not applying the principle of Mudarabah in an acceptable manner. Where Mudarabah stresses the sharing of risk, critics point out that these banks are eager to take part in profit-sharing but they have little tolerance for risk. To some in the Muslim community, these banks may be conforming to the strict legal interpretations of Sharia but avoid recognizing the intent that made the law necessary in the first place.[citation needed]
The majority of Islamic banking clients are found in the Gulf states and in developed countries. With 60% of Muslims living in poverty, Islamic banking is of little benefit to the general population. The majority of financial institutions that offer Islamic banking services are majority owned by Non-Muslims. With Muslims working within these organizations being employed in the marketing of these services and having little input into the actual day to day management, the veracity of these institutions and their services are viewed with suspicion. One Malaysian Bank offering Islamic based investment funds was found to have the majority of these funds invested in the gaming industry; the managers administering these funds were non Muslim.[40] These types of stories contribute to the general impression within the Muslim populace that Islamic banking is simply another means for banks to increase profits through growth of deposits and that only the rich derive benefits from implementation of Islamic Banking principles."
I am not sure how to reply to this, as I am weak on this matter.
He further elaborated his question:
"Money is a utility, Interest is the cost of borrowing money. The way it works in the West, A person goes to a bank to get a loan, He thinks the bank is giving him the loan, but it's not. The money is created at a central bank of the country. The central bank Lends the money to the person's bank at interest and the person's bank lends it to the person for a little more interest. And if all Loans were to be payed off there would be no money left it all belongs to the central banks of the world. The funny thing is that they just create the money out of thin air only because there is a demand. And where does this new money find its value? It finds it from the old money. Thats why the price of goods go up. What makes up an interest rate? Profit,Administration Fees,Default Loans, Taxes. Default loans is the biggest contributor to an interest rate. Banks love low interest rates, they lend out more money with less default loans, but if to much money is created, the money losses value to quickly. Then the government steps in and tells the Central Bank to raise the interest rate. Loans slow down. Existing money gains value. I don't understand why Islam has a problem with this,"
And:
"What would be the trigger for a central Islamic bank to print more money ?Without gold to back it up,or a resource, other currencies. DEBT-FREE MONEY. Low or high the money in the Islamic banks was created from interest,"
So I am in a bit of confusion here myself. Any ideas on how to answer? Is anyone knowldgeable on this subject? If so, please do help me give a reply. I am eager to learn myself.
I posted a comment on Youtube, and he saw my answer and posted a comment on my profile asking me for an explanation on certain Quranic verses and questions on Islam, so I answered him. After a while he started asking more questions, and recently he asked about Islamic finance. From his discussions, he is respectful and doesn't throw insults at me.
