interest and islam

[sumaaan]

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FIXED RETURN …………….. I did’nt agree with this theory, as far as my understanding is concerned Islamic economy is based on risk associated theory. One has to bear risk for return. The difference b/w riba and interest……….its little hard to understand ……... lets simplify ourself (for discussion sake) say riba what is haram …and profit what is halal.

In my view the whole Islamic banking is based on the theory that it’s a pool fund with large base of investors (you can say depositors). The bank acts as a mudarib and invest fund on behalf of depositors. The total return will be ascertained after the period and bank after deducting allocable expenses and mudarib fee determine return for depositors. Now almost all banks in Pakistan especially who are working on Islamic principles not offered fixed rate of return. They quote you last declared rates and the final rate would be different based upon actual performance of the fund. Now the question is ………from where bank get income. Lending??? …… stock market operations??? …… Islamic financing??? …… money market transactions????? …...the bank whose investment side is in sharia compliant product is giving halal profit.

As far as Islamic banking is concerned Mezaan is the first bank who takes license of Islamic banking from State Bank of Pakistan. However, there are number of banks in Pakistan who were following Islamic banking principles even before Meezan. Albaraka Islamic bank is one of them, Faysal bank to the some extent. Now there are many banks that have Islamic banking divisions (separate branches for these operations). Alfalah, Khyber, MCB are among those. They all declare final rates after the finalization of results of the period mostly on half yearly basis. They either pay profit after the period or made payment on provisional rates and adjust after the period. I know Albaraka and they are working on the same principle.

Business on fixed return basis……………… I don’t think this is according to best Islamic practices. Decision making right is not the criteria. One has right on profit from the day he invests in business and should not be fixed; he should entitle the return based on performance of the business. If business makes a loss it should bear it in proportion.

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Plz Smile ...... it cost just some pleasent breaths!

Edited by - fidarsi on Mar 24 2004 41040 PM
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Have to agree with you... You are totally correct... But as far as I have learnt, that 'decision making' thing also comes in the 'halal' boundaries of Islam... Although I will reconfirm with a different scholar this time.