Forums and Chat for Indonesia's English-speaking community
Topic Options
Rate This Topic
#66871 - 22 Dec 07 19:11 Sharia Banking
flingwing Offline

Registered: 28 May 07
Posts: 188
Loc: Jakarta
The concept of Sharia banking has me wondering for years. I knew that Muslims don't allow making profits directly from money. Charging any interest is haram. How then, I've wondered, could an institution like a bank remain in business without making a profit from money?

The following excerpted story is from the BBC <>.

Q&A: Islamic Finance

What is Sharia law?
Under Sharia Islamic law, making money from money, such as charging interest, is usury and therefore not permitted.

Wealth should be generated only through legitimate trade and investment in assets.

How does Islamic finance work?
The overarching principle of Islamic finance is that all forms of interest are forbidden.

The Islamic financial model works on the basis of risk sharing.

The customer and the bank share the risk of any investment on agreed terms, and divide any profits between them.

Categories of Islamic finance:
(1) Ijara,
(2) Ijara-wa-iqtina,
(3) Mudaraba,
(4) Murabaha and
(5) Musharaka.

(1) Ijara is a leasing agreement whereby the bank buys an item for a customer and then leases it back over a specific period.

(2) Ijara-wa-Iqtina is a similar arrangement, except that the customer is able to buy the item at the end of the contract.

(3) Mudaraba offers specialist investment by a financial expert in which the bank and the customer shares [sic] any profits. Customers risks [sic] losing their money if the investment is unsuccessful, although the bank will not charge a handling fee unless it turns a profit.

(4) Murabaha is a form of credit which enables customers to make a purchase without having to take out an interest bearing loan. The bank buys an item and then sells it on to the customer on a deferred basis. [FW Note: how is this different from Nos. (1) and (2)? And does the bank sell the customer his item on credit without interest?]

(5) Musharaka is a investment partnership in which profit sharing terms are agreed in advance, and losses are pegged to the amount invested.

Nearly all the traditional retail banking services expected from established High Street banks are available in a Sharia-compliant format. The Islamic Bank of Britain offers a Sharia compliant current account, mortgage and even personal loan. [FW Note: This BBC story also has some great, gapping holes in it, too. For a sharia-compliant mortgage the Bank of Britain buys a house for a Muslim and then allows him to pay for it on credit? Where's the profit for the bank - when the customer sells the house?]

Can someone give us a recap for non-financiers?
What, then, is the difference between this and normal banking, except some Islamic slight-of-hand and Gonzo Bookkeeping? Looks like just more BS to make them think they're "different". I wish they'd ask me, I'd tell them how different they are - living a 90-percent, borrowed-but-now-dead dream. bomb

Have a Nice Forever!

#66872 - 22 Dec 07 19:52 Re: Sharia Banking [Re: flingwing]
Capt. Mainwaring Offline
Pujangga Besar

Registered: 16 Aug 06
Posts: 3225
Loc: here
Can't you work it out?

It's a little bit like kosher bacon - so long as a rabbi from The Beth Din wishes it long life then it's OK.

Are you are vegetarian?
I also made a vegetarian version,with tempe and tofu chunks for myself and others.Get over it.

#66873 - 22 Dec 07 20:36 Re: Sharia Banking [Re: Capt. Mainwaring]
flingwing Offline

Registered: 28 May 07
Posts: 188
Loc: Jakarta
But kosher bacon is made from soybean derivatives, not pork. So-called "Muslim banking" makes profits from the use of money (interest by another name). The two are not close to being "a little bit [a]like".

Quoting: Capt. Mainwaring
Are you are vegetarian?

I'm so sorry, but I only speak English, Indonesian and Javanese.

Have a nice day. rockon


Moderator:  NetCop