Working as an Investment Banker....

Society Religion & Philosophy
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Assalam o Alaikum,

I would like to hear views (preferably supported by quran/hadith and also by logic) on the topic.

Let me explain my job nature a lil…precisely, why i made it a point to write an Investment Banker and not just a banker.

We are part of the commercial bank…and are in the business of lending long-term loans to various manufacturing concerns, based on our analysis of their future performance. This involves predicting how a company is going to perform in future, developing projected financial performance scenarios for the company and all.

We (our department) earn our income in the form of advisory fee (and not vanilla interest). I was just wondering if it still comes under the category of interest?

..not just that, but views on how and why interest-based dealings are prohibited in Islam would also be appreciated.

Jazak Allah,

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Khanu Bhai, I am not an expert but I know the very basics of Islamic economics, so I share with you that before the experts come here with their fatwas.

Interest is prohibited as it harms the poor & is against justice. Wherever this fundamental is dealt with, interest accumulated is not the one that is prohibited.

Secondly, the whole idea of economics that Islam gives is the one where wealth is distributed throughout the society, not accumulated in the hands of a few wealthy or clever ones. It’s a system that establishes welfare not a system that establishes growth of money.

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AJ: I am not sure what you mean by interest hurting the poor. In the 7th century when the Koran was written, there were no financial instruments around like Forex Swaps and REITs etc. The sophistication of instruments traded was probably limited to sheep and camels. Secondly, we can argue until the Holy cows come home about the merits of such religious edicts.

**Note from mod: What makes you think you can answer questions related to Islam? Leave them for the Muslims!

Sentinel.**

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Chaltahai bhai, you need to visit some down poor areas of Pakistan & India where people actually live on interest. In other words, that’s what they do; give out money to the poor & then in return charge huge amount of interests. So much so that generations after generations are paying for the debts of their forefathers and no end is in sight. Where those who collect interest don’t do anything but live off of the interest they earn.

Similar was the case in Arabia that Islam abolished. Some will argue that it is the case now on global level, where rich nations gives out loans to poor nations & charge humongous interests .. and no one can say for sure when they will be debt free, if ever. Though is it that the interest is too large or bounded or that the governments in those poor countries are so corrupt .. It’s another lengthy discussion.

Current banking laws and interest systems are very complicated. For example, the house loan on which we pay interest, according to the majority of Muslim scholars, is not prohibited. As it’s fixed and very beneficial for the poor who might probably never be able to sum up enough money to buy a house on his own.

Yes, very long very complicated discussion and I am certainly no expert!

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ChaltaHai: I have briefly read your message....what i couldn't get is when you talk about 'unless they come in the form of direct equity injections.." Please explain.

Furthermore, to my mind, money is not a factor of production as far as islamic economics go. Since money is not considered a factor of production, accumulation of interest or growth in this factor stands void (to my mind at least). Also, i don't think there is any concept of inflation in religion....please correct me if i am wrong.

I want to raise another point...as AJ also said, interest that harms the poor..i was just wondering if that's true for interest as well. I mean alrite, to any sane mind, the interest quantum of Shylock is unjust, but if we charge interest to the client (to account for inflation and our efforts..i am talking about plain commercial lending here and NOT my department)..which is acceptable to him (14-15%p.a. over a 5-year tenor is the rate here depending on the client's risk profile), does this still get prohibited?

Thanks AJ and CH for yer inputs...looking forward to more.

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usary: the lending of money at exhorbitant interest rates.

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chaltahai i think u shud leave Islamic matters for the muslims....

khanzada, its not allowed....

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Khanzada: Apprarently Religion is a misnomer as this forum should be titled Islam. If you have questions on how private equity allotment could be considered haraam let me know via PM or open one in C&A. I can give you my opinion based on the definition that you and AJ provided.

As you are aware that Interest based loans arebased on the present value of money+IRR-inflation. If any of the components there are identified as haraam then you have an issue. I asked my friends in Islamic Banking about this (I believe they called it RIBA). Their definition has more to with the intent and rightly so of the capital ivestment.

I am not sure if the professors on this forum understand what you do and could help you out.

Sentinel: What's your issue dude? If you don't understand what some people are talking about,ask. I would be more than happy to drop some knowledge on merits of interest. My argument was based ont he concept of interest not on islam.

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Khanzada,

You may find this information an interesting read.

Sentinel and armughal, just because someone doesn’t carry a label on their forehead reading “Muslim” doesn’t mean they don’t know the subject. When Khanzada added “and also by logic” in his query, I believe he was asking for someone like CH’s advice as well.

CH is a professional who can provide some info on the subject.. unless both of you are MBA’s or Economists from an accredited institution and also accredited Muslim Jurists, it wouldn’t hurt to learn a thing or two when you can, or at least leave it around for people like me to learn from it. You can edit the post and add the warning that CH’s views aren’t “mainstream Muslim”… but then again I think Khanzada and other readers know that anyway.

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PakistaniAbroad: Yara appreciate the article..i will post my comments on it shortly. Um, i would again like to have your views on:

Is a little of interest as bad as lots of it? (quantum of interest..does it determine..if it is haraam or not, or is it again due to my understanding that since money is no factor of production so there is no concept of appreciation in it overtime?)

Thanks,

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[QUOTE]
**Note from mod: What makes you think you can answer questions related to Islam? Leave them for the Muslims!

Sentinel.**
[/QUOTE]

Does one have to be Muslim to have studied Islam?

Do these rules apply to the Christian-bashers answering Christian-related questions?

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Yes it does Seminole, for those questions that are related to Christian 'Jurisprudence'.

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[QUOTE]
*Originally posted by Sentinel: *
Yes it does Seminole, for those questions that are related to Christian 'Jurisprudence'.
[/QUOTE]

Considering some here can spend entire posts lambasting Christian rules, customs, and traditions - it would seem you will have many posts to delete in the future.

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Chaltahai,

Bro what religion are you?

On interest:

I've heard its haram, but I have no knowledge of Islamic economics so I am unable to comment. Cant see the harm if your the one making the money on interests though-credit creation is a major source of economic growth.

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Note from mod: Use approprite langauge to express yourself.

Sentinel.

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ibid

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oh come on guys...some people may bring religious insight to this thread others may bring specifics on how financial markets and different instruments operate.

Treat others as you would have them treat you.

while we are at this. anyone care to describe the difference between a traditional mortgage and an islamic one? :)

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Wa’alaykum asSalaam wa rahmatullaah dear brother khanzada,

The topic of riba or usury (interest) is one that is widely acknowledged amongst the Muslims, yet its evils are not as expansively understood. For this very reason, a pamphlet was produced here in the UK a few years ago addressing the issue in order to shed some light on the subject. The article, which I’m sure that you’ll find useful insha’Allaah, can also be found on-line: thetruereligion.org

Yes my dear brother, I’m afraid it would still come under the banner of interest. As you are aware, a great proportion of a bank’s transactions are interest based, which is also highlighted in their ‘profit and loss acount’. By working for another department, be it in asset management, capital investment, company venture and forecast etc does not retire the fact that the department is a component belonging to the mechanism at the core – the central bank – an interest based operation.

In your case brother, then you are moreso connected to the lending of ‘riba’ based loans, by calculating and qualifying forecasts in order to determine the sum of loan to be allotted or eligible to the companies.

It has been authentically narrated in Saheeh Muslim, on the authority of the companion Jaabir – radhiAllaahu ‘anhu – that the Messenger of Allaah – salallaahu ‘alayhi wa sallam – cursed the one who consumes riba, the one who gives riba, the one who writes it down and the two who witnesses it. He said: “They are all equal in sin”.

Commenting on this hadeeth, an-Nawawee – raheemahullaah – said: This is clearly a prohibition of writing down or witnessing of contract between the two parties involved in a riba based deal. It also includes a prohibition of helping others to do wrong acts.

And Allaah – subhaana wa ta’aala – says: **”… but do not help one another in sin and transgression.” **[Soorah Maa’idah 5:2]

It is inevitable that an employee in an interest based bank will play a part in riba in one way or another.

**Those who devour usury will not stand except as stands one whom the devil by his touch has driven to madness. That is because they say: Trade is like usury: but Allah has permitted trade and forbidden usury… Allah will deprive usury of all blessing, but will give increase for deeds of charity, for He loves not any ungrateful sinner… O you who believe, fear Allah and give up what remains of your demand for usury, if you are indeed believers. If you do it not, take notice of war from Allah and His messenger, but if you repent you shall have your capital sums; deal not unjustly, and you shall not be dealt with unjustly. And if the debtor is in difficulty, grant him time tin it is easy for him to repay. But if you remit it by way of charity, that is best for you if you only knew. ** [Soorah al Baqarah 2:275-280].

… and Allaah knows best.

regards,
&peace

“No leaf falls except that He knows of it, and no rain drop forms except that He has willed it.”

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Damn, I somehow feel like apologising to CH for Poo's post, but then I will let it pass as I am not too good a Muslim. Not too good for the mods of religion forums on most pakistani message boards.