Islamic and Non Islamic Financing - Difference?

[sohaib]

Asalamo Alaikum All,
Alhamdulillah - Lots of sincere points from all sides. Islamic concepts are not idealistic. Its important that we keep that point in mind. The reality is that if we do not follow the Sunnah, then we get ourselves into difficult scenarios that are frankly our own making. I wonder if any one of us has the ability or motivation to become a pioneer in the trying to resolve the fundamental question we are discussing here. One question that certainly came to mind, was the distribution of Zakat funds. We have a potential solution to the problem of "to invest or not to invest". This is the Islamic "social security system". Where are the funds? Has anyone asked? Zakaat would alleviate the investment question in the case of the widow above if not for the wider society.

[sumaaan]

I think this thread has already been discussed in the form of INTEREST AND RIBA in another topic... Now to make it simpler...

Interest is also offered in banks in Saudia Arabia who declare that they offer pure Islamic Banking... Interesting??

Its quite simple... There's a teeny tiny difference between Interest and Riba and thats what differentiates both... What you invest in a business/company/etc and get a percentage return (interest/share-of-profits) from it is LAWFUL and hence NOT HARAM... But where you give someone a LOAN (and not INVEST the money), or get interest/share-of-profits from a person/entity who earns by lending loans, and receive a percentage return (interest), thats UNLAWFUL in Islam and hence HARAM, and this is the thing that goes by the name of RIBA...

Now to make it more simpler... If you're investing money in some bank, and getting interest on that sum of money, why do people call it haram?... It's haram because the system on which the Bank operates is of Riba... For instance, when you invest your money in some bank, they use your money to offer loans to people on which they (banks) earn interest which is RIBA... And in return, the interest that the bank gives you is purely made of RIBA... Hence it is HARAM...

But when you look at banks that offer PURE ISLAMIC BANKING such as banks in Saudia Arabia, they do offer interest to you as well... But the interest that they offer is NOT MADE UP OF RIBA (lending of loans)... They use your money to make investments in huge business and in return they earn profits from it... Hence, the interest they give you back is made up of the PROFITS that they've generated and is therefore purely HALAAL...

Thats the main difference between banks that offer PURE ISLAMIC BANKING and the others...

Its just like a friend of yours is starting a business... He asks you to invest some money in it... But you don't have sufficient amount so you invest, lets say 5% to the total capital... So because you have such a small investment in the capital, you CANNOT MAKE DECISIONS as the loss suffered wouldnt effect you much but will effect those who have a larger capital at risk (your friend)... Therefore, you are termed as a sleeping partner... You cannot interfere in the business activities, but as you have contributed in the capital, you will receive a fixed percentage of return on your investment...

That is exactly like investing money in banks that offer RIBA FREE or PURE ISLAMIC BANKING... The bank acts as an agent to transfer your money to a business that is likely to need additional capital and in return the bank gets some share of the profits, which is after some more appropriation given back to you in the form of INTEREST/SHARE-OF-PROFITS (in this case HALAAL)... But please note, if you know that the business the bank is investing in is not earning profits lawfully, than the INTEREST/SHARE-OF-PROFITS you are getting back from the bank is UNLAWFUL (HARAAM)...

But when you invest your money in a bank that offers LOANS to individuals and in return demands an INTEREST ON LOAN (fixed SUM OF MONEY), the amount of INTEREST the bank gets from that individual is shared between you and the bank... Hence, in this case, the amount of money (interest) you receive by investing money in the bank is labelled RIBA as it is an INTEREST ON LOAN and NOT PROFIT ON INVESTMENT...

I hope that differentiates between RIBA and INTEREST ( and in a manner Islamic and non Islamic Financing).

However, mortgages and some other investments are far too complicated to be discussed.

[sheriffkhan]

Real meaning of riba is exploitation- if interest results in suffering or exploitation or unjust- then only it is forbidden.
It is very clear that Islam has forbidden specifically to interest appearing at that time.
It refers to unjust usury as it appeared 14 centuries ago.
Modern day banking interest for business purpose is just and profit sharing based on certain rationale and logics- it is scientifically computed profit share. There is no alternative to this form of banking.
Whatever Islamic banking prevails today is based on same principles- interest is charged by alternative means and it is simply legitimized by superfluous paper work.
Paper work is unnecessary for God- because he knows our intentions.
So-called trade and profit sharing- if not done in just and honest and ethical manner is equally forbidden like interest.
It is disappointing that while world is going forward- we are still debating for last 15 centuries on non issue like interest.
There are worse evils in our society like corruption-dishonesty- injustice- women and child abuse- lawlessness- this is a long list.
We must concentrate on removing these other and worse evils.
Jewish lobby have deliberately brain washed Muslims into renouncing
Banks and finance and insurance- because if Muslims grab it - they will achieve finance power- Zionist do not want Muslims as bankers and they do not want Muslims to control it- so they have planted this idea- and unfortunately- we do not wisdom to differentiate between unjust interest and modern day just and fair interest for business purpose and profit sharing.
If we decide to share profit honestly then perhaps it is a different issue- but show me one single Muslim who will compute honestly a share of profit for others- look at our corporate sector

[sheriffkhan]

Real meaning of riba is exploitation- if interest results in suffering or exploitation or unjust- then only it is forbidden.
It is very clear that Islam has forbidden specifically to interest appearing at that time.
It refers to unjust usury as it appeared 14 centuries ago.
Modern day banking interest for business purpose is just and profit sharing based on certain rationale and logics- it is scientifically computed profit share. There is no alternative to this form of banking.
Whatever Islamic banking prevails today is based on same principles- interest is charged by alternative means and it is simply legitimized by superfluous paper work.
Paper work is unnecessary for God- because he knows our intentions.
So-called trade and profit sharing- if not done in just and honest and ethical manner is equally forbidden like interest.
It is disappointing that while world is going forward- we are still debating for last 15 centuries on non issue like interest.
There are worse evils in our society like corruption-dishonesty- injustice- women and child abuse- lawlessness- this is a long list.
We must concentrate on removing these other and worse evils.
Jewish lobby have deliberately brain washed Muslims into renouncing
Banks and finance and insurance- because if Muslims grab it - they will achieve finance power- Zionist do not want Muslims as bankers and they do not want Muslims to control it- so they have planted this idea- and unfortunately- we do not wisdom to differentiate between unjust interest and modern day just and fair interest for business purpose and profit sharing.
If we decide to share profit honestly then perhaps it is a different issue- but show me one single Muslim who will compute honestly a share of profit for others- look at our corporate sector

[wazeeri]

Salam Pervez

I read a bit of your post and would like to read the whole thing but I am in a hurry,
I just wanted to say that Rashad Khalifah has been declared a kaafir because he claims to be a prophet/messenger after the Prophet(pbuh). He has removed two verses from the Quran to make it fit his weird 9 rule (don't worry about it).
No one can stop you from reading the English Translation of the Quran but it is always better to goto people for knowledge or direction rather than trying to go at it alone.

Salam
Mohsin

[KiranFatima]

Assalam-o-Alaiakum To All ! ....
The topic all of u are disscusing is really improtant....... but there is another topic which is very important too is
As all the banks have the basement of intreset (this is done, talking abt non islamic banking particulary) then the pays given to their employees are also contain interest amount in them..... so these pays are considered as HARAM for the employees working there..... In short according to Islamic Point-Of-View, working in banks (particularly non islamic banks) is NOT allowed as the pays given to the employees are must be containing the amount which has been taken from their customers as interest. ??? is it true ??? plz reply me.