samuibeachcomber Posted January 7, 2009 Share Posted January 7, 2009 since the credit crisis in the western banking system,the media have been writing about the growth in islamic banks,now opening in the UK and i believe in australia.Has anyone any knowledge of how they operate(what are the principle differences in how they operate to western banks?)I read somewhere that loans taken out for property,interest is n't charged but that the bank take a share in the profit of the increased value of the property,or something like that.Any experts out there know the answers to my questions and any opinions as to whether they could be a safer option and more profitable to the borrower? Link to comment Share on other sites More sharing options...
Naam Posted January 8, 2009 Share Posted January 8, 2009 i haven't heard of any islamic banks giving mortgages based on Sharia principles and i consider it next to impossible that they demand a profit share (according to the teachings of the Qr'an) if the property's value increases. but since decades banks in many islamic countries do not pay or charge "riba" (interest). they changed the name of the baby, call it "commission"... et voilà! Link to comment Share on other sites More sharing options...
12DrinkMore Posted January 8, 2009 Share Posted January 8, 2009 As usual Wiki comes up with the goods http://en.wikipedia.org/wiki/Islamic_banking Basically they operate the same way as normal banks, but just redefine a few terms to keep the Mullahs happy. For example interest on deposits = hibah which is a "gift" given to the depositor, Or interest on mortgages = through murabah, the bank buys the property from the seller and then sells it to the final buyer at a higher price, the buyer then pays off the loan in installments, effectively a fixed interest long term loan, but they can't call it that... I guess it is better if I refrain from any opinions on religion. Link to comment Share on other sites More sharing options...
Naam Posted January 8, 2009 Share Posted January 8, 2009 As usual Wiki comes up with the goods Wiki provides in many cases good information. however in other cases Wiki provides not only rubbish but also pure refined bullshit. the latter applies to Wiki's explanation of Islamic Banking Link to comment Share on other sites More sharing options...
samuibeachcomber Posted January 8, 2009 Author Share Posted January 8, 2009 so am i to take it that you consider islamic banking as BS, or do you think it has any value to the consumer over western banking? Link to comment Share on other sites More sharing options...
Naam Posted January 8, 2009 Share Posted January 8, 2009 I guess it is better if I refrain from any opinions on religion. if you point to a specific religion, i.e. Islam, the answer is yes. Christianity banned charging interest (based on numerous Bible mentioning) for one-thousand five-hundred years. Link to comment Share on other sites More sharing options...
Naam Posted January 8, 2009 Share Posted January 8, 2009 so am i to take it that you consider islamic banking as BS, or do you think it has any value to the consumer over western banking? i don't consider it as BS as it provides a Muslim who believes in some current interpretations of the Qr'an a way to invest without violating his principles. but mind you, the interpretations differ. initially the word "riba(h)" depicted usury (excessive interest). although very flowery the arabic language does not differentiate between usury and interest. the dominating islamic scholars are fundamentalists and so are their interpretations and rulings. no, i don't think that Islamic Banking provides any advantages for a non-Muslim. the result -looking closely at it- is a zero sum game. it is also a well known fact that Islamic Banks have access to their Central Banks for refinancing and are of course required to hold minimum reserves with them. in both cases interest is involved no matter what substitute word is used for it. Link to comment Share on other sites More sharing options...
samuibeachcomber Posted January 8, 2009 Author Share Posted January 8, 2009 ok naam,thanks for that.when i opened the topic,i just wondered if their way of banking was a more fairer or equitable way of doing things when compared to our own banks. Link to comment Share on other sites More sharing options...
Naam Posted January 8, 2009 Share Posted January 8, 2009 ok naam,thanks for that.when i opened the topic,i just wondered if their way of banking was a more fairer or equitable way of doing things when compared to our own banks. actually it is less fair than "western" banking where you deposit your cash and know in advance what yield to expect. depositing cash into an islamic bank makes you vulnerable as the bank might show a balance sheet loss and is therefore not required to pay you a profit share as demanded by the Qr'an. the latter is only cushioned by the assurance that the bank will guarantee to pay out a minimum "profit share". using the expression "profit share" even in case of losses is in my opinion Link to comment Share on other sites More sharing options...
12DrinkMore Posted January 8, 2009 Share Posted January 8, 2009 however in other cases Wiki provides not only rubbish but also pure refined bullshit. the latter applies to Wiki's explanation of Islamic Banking Which particular bit of Wiki's explanation do you disagree with? All your following posts seem to agree with the Wiki description. Link to comment Share on other sites More sharing options...
Naam Posted January 8, 2009 Share Posted January 8, 2009 however in other cases Wiki provides not only rubbish but also pure refined bullshit. the latter applies to Wiki's explanation of Islamic Banking Which particular bit of Wiki's explanation do you disagree with? All your following posts seem to agree with the Wiki description. actually i did not look at Wiki at all but referred to your quote which i think was taken from Wiki: "Or interest on mortgages = through murabah, the bank buys the property from the seller and then sells it to the final buyer at a higher price, the buyer then pays off the loan in installments" in other words, you buy a home, finance it with an islamic mortgage, furnish the home and settle with your family, live thre happily for a certain time and then you let the islamic bank sell it with a profit to repay your mortgage? Link to comment Share on other sites More sharing options...
endure Posted January 8, 2009 Share Posted January 8, 2009 No - the bank buys the house from the seller then sells it on to you at a higher price. You pay for it in instalments which now, theoretically, don't contain interest. When you've paid the last instalment you own the house - just like a non-sharia mortgage. Link to comment Share on other sites More sharing options...
Naam Posted January 8, 2009 Share Posted January 8, 2009 (edited) No - the bank buys the house from the seller then sells it on to you at a higher price. You pay for it in instalments which now, theoretically, don't contain interest. When you've paid the last instalment you own the house - just like a non-sharia mortgage. sorry! my misinterpretation. it happened because i shot from the hip confusing seller and buyer the above makes of course much more sense but i think it is not practicable. one could write a paper listing much more cons than pros. Edited January 8, 2009 by Naam Link to comment Share on other sites More sharing options...
12DrinkMore Posted January 9, 2009 Share Posted January 9, 2009 One could write a paper listing much more cons than pros. Aah, but the main pros are unbeatable - The mullahs have asserted their right to control the hoi palloi - The specialist financial advisors have made a small fortune in ratifying the deal - Your religious conscience remains at peace So all are very happy. Link to comment Share on other sites More sharing options...
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