I think we all need to understand something at a fundamental level. Why the heck would any institution (banks ofcourse here) safeguard your money and provide you with the means to access it and spend it FOR FREE. Why would anyone take that responsibility or risk for free. It doesn't cost us anything to open checking or savings accounts. Its because money in either account is used by the bank to circulate money in the economy. If you truly do not want this then get a locker and pay for the services to the bank. How can we expect the banks to go about safeguarding and keeping our money for us without making a profit on it for their operating expenses. They just share some of the profit with us which is termed interest. Even in checking accounts with no interest you are still getting interest in the form of the services provided with the account i.e. debit cards and checks etc.
^ i second that.
People may not wanna call it interest, but really, thats what it is. Interest can be received in many forms, and we also pay interest in many forms.
call apple an orange or peach, the taste of it will keep it an apple.
Peace USResident and Mr.Popat
That's my point entirely. Instead of charging us for keeping the money they give us money for keeping the money.
There are two definitions of riba'
a) Money for more money on a time-based rate
b) An exchange of similar goods without a currency medium that has standardised real value.
These are both unknowns or dubious and since exchange is a contract and a contract needs to be binding and clear this type of contract is not allowed.
The stricter way of looking at financial deals is to be involved in each transaction where the money is going for investment. This way the money is going towards buying shares and then converted back to money.
yep, thanks for the reply.
What do you say about mortgages? the amount of monthly payments people make as mortgage also has an element of interest in it. Is it acceptable to buy a house knowing that you're paying interest in ur mortgage?
Thanks.
No it is not acceptable generally, but to those who present a need to a local mufti after assessment they may be given a specific allowance for it.
Islamic Bank usually take deposits on Mudariba basis, Mudariba is a partnership account where the depositor work as Rab bul Mal ( Silent Partner) and the bank acts as Mudarib( active partner) .
Few things that should be agreed at the inception of the relationship between depositor and Bank is Profit sharing ratio, the basis of distribution of the profit and that the amount will be invested in halal avenues.(murabaha, Ijarah etc)
Profit for each profit paying period is distributed according to the profit sharing ratio, the loss ( which can only arise in case of large non performing loan or negative spread) will be borne by the depositor as per the rules of mudaribah.
Alhtough it may seem to a lay man the it is similar to interest as briefly explain above it is not and the profit earned is halal income.
I think the misconception (or perception) is that depositing money into a checking or savings account is akin to providing the bank a loan. I guess my thoughts on this are different. I view it as investing in a very very secure business because it has no contracutal term as would be in a loan, neither is the bank required to close our accounts after a duration as in repaying the loan. Its similar to capital investment by an owner in a company. The owners equity grows if the company is profitable (as the interest or profit we get from banks on our deposits) and the owners equity decreases by their own drawings. Banks do not deduct money from our accounts, we do. And yes the risk of loosing the money as compared to any other business venture is very slight with banks.
Money for money with a time-based rate is misleading without considering the factors that surround it. Money in intrinsic form can be scrutinized under this principle but I disagree or at least am not convinced for fiat money. The face value of fiat money is not a measure of its value but rather its purchase power is. And purchase power is a time based variable with many other economic entanglements.
Exchange of similar goods or goods with similar intrinsic form is a valid point under Riba. The grade of the goods should not used to assess Riba but converted to an exchange medium and then better or poorer grade of similar goods can be bought.
I think what I am alluding to or working up to is the idea of exchange media - Is money - i.e. paper of a given currency or digits on a screen up to the task?
I would say not … standardised real value - are resources - gold, oil, gas, food, water … Money bears the promise of value and we give that promise to others. However, there is far more money in circulation than the real value it promises to be able to provide.
There is something wrong with the banking system as a whole and I will need to sit down and think about it with a clear head. Do the maths and pick at the various ways of “viewing” the bank as a business … or otherwise. Surely, I do not own any shares of my bank.
Also, when people give Arabic names to financial acrobatics that are performed by the banks … it makes me want to investigate further. I’ve looked into the so called halal mortgage, and found it a worrying thing.
I’m not an advocate of stopping everything nor am I telling everyone to stop banking. I am however trying to say that banks are not halal in the purest of definitions and everything we do today is a result of the “norms” which makes rise to the condition of “those who do not partake in rib’a are covered in its dust”
I would agree that there are not enough liquid monetary assets to cover what circulates on the books, which is why Cash is but one asset of the whole accounting equation and financial statements of companies. Paper currency is no longer a vis a vis commodity based phenomena anymore. The promise of value takes into account everything which comprises a country’s GDP and more.
I absolutely agree the Islamic finance industry gymnastics are vastly masquerades and anyone with the basic understanding of finances and Islamic fundamentals can easily shoot holes through it. Its more marketing driven than founded on a principle. So far I cannot call any Islamic finance I have encountered in the US one that at least satisfies me when it comes to claiming soundness of Islamic principles.
Agree with the dust of riba. We unfortunately have evolved into a very very convoluted society but for good reasons as well.
