A R C H I V E S
Madinat al-Muslimeen Islamic Message Board
| Questions about Interest |
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| Caraj |
| 02/19/05 at 18:36:28 |
| Is it interest cannot be charged nor accepted? How do Muslim companies make money if no interest is charged? Banks, auto lots and mortgage companies? I mean running a business takes money, so how do they make their money to pay their bills? Where are we told about this? Other info on interest and Islamic ways of handling money (business and personal) would be appreciated. (ie: paying debts, interest, loaning money, gifts, etc) |
| 02/19/05 at 18:38:07 |
| Caraj |
| Re: Questions about Interest |
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| Mossy |
| 02/19/05 at 19:19:00 |
| http://www.as-sidq.org/download/finance.chm http://muslim-investor.com Eh, the positions of Mufti Usmani/Shaykh Talal are pretty standard, although on some of the more advanced financial instruments it doesn't seem that one could really have any firm position - eg the whole derivatives hooha.. (sorry for linkage rather than postage, s'late and am sleepy..) |
| Re: Questions about Interest |
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| WhiteSomali |
| 02/20/05 at 00:37:07 |
| [slm] Any deal involving interest is haram; charging interest or paying interest are equally bad. From my understanding, businesses that wouldn't charge interest would operate like this: basically say I wanna buy a house for $200,000.. What i would do is go to the interest-free banking, and they would buy the house for $200,000, and then sell it to me for something like $250,000 and let me pay that off in the regular monthly installments. The numbers are unrealistic and made up, but as far as ikno thats how interest free banking systems work.. hope im not telling u something wrong, theres ppl on the board that kno alot more about it than me. Using credit cards is okay as long as we pay off the balance quickly enough so that no interest is charged to us. [slm] |
| Re: Questions about Interest |
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| bhaloo |
| 02/20/05 at 08:33:50 |
| [slm] Ahmad that's an interesting approach, the way I've heard how they do housing according to the Islamic way is this. You enter into a partnership with someone that can buy the house with you, i.e. a bank. Let's say its $200,000. You pay 20% down (40,000) and they pay the rest, $160,000. So you own 20% of the house. You determine the rent for the WHOLE house, let's say its $2000 a month. So you rent 80% of the house from the bank (80% of $2000 = 1600) since you don't own that portion. Let's say you want to increase your ownership in the house, you can pay extra money to the bank to buy part of their ownership. Say you want to buy 5% , which would be $10,000. So then you would own 25% and the bank owns 75%, and you would owe the bank 1500 (75% of 2000) a month instead of 1600. |
| Re: Questions about Interest |
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| WhiteSomali |
| 02/20/05 at 12:44:04 |
| [slm] Yea Br Arshad the way you're referring to is actually the way I learned is how it's done too... But it was a long time ago and my memory got corrupt I guess :-/ Thx for clearing it up See here everybody lives in metrohousing projects so we dont have to worry about this kinda stuff ;D [slm] |
| Re: Questions about Interest |
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| Ember |
| 02/24/05 at 17:53:42 |
| [slm] Sister Azizah, one of the events that shows the gravity of interest is when the prophet (saw) came back from mehraaj (his voyage to the heavens and masjid ul aqsa) and he spoke of the fate of those who had taken riba(interest). He said that he saw people in hell who had snakes coming out of their intestines and when he asked angel jibreel who theywere he was told that these were people who took, gave or were involved in riba. I don't know the authority of tyhis hadeeth but Im sure brother Bhaloo or someone can give it to you. It is a grave sin sister. We should find all ways to avoid it. Even if it means that we don't increase our wealth in this world. It is hard in the US, but this makes us luckier as we will have to work harder to avoid it and thus our favor with Allah will be greater, Insha Allah |
| Re: Questions about Interest |
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| labeeb |
| 02/24/05 at 21:33:20 |
| [wlm] Interesting. But, it seems bro Ahmad's maths would be more enticing to a businessman than what bro Bhaloo has put forward. Reason is - nobody (a bank or big investor) would like to buy houses and cars and other kind of small articles and depend on individuals to pay back on time and not default or cheat etc. And in return (even if no one defaults) make no profit at all! In fact there is a chance of losing money if the market is inflationary. This sounds more like a socialist system wherein the government is giving interest free loan. In Malaysia most of the Islamic banking is done the former way (one with profit). Yes, the profit is not set as high rather they come up with a profit margin that would be comparable to what a non-Islamic bank would charge an interest on this. To give you a number, lets say you are eligible for a loan of 10000 at an interest of 10% calculated per year. Say, you are supposed to pay a minimum of 200 per month. At no interest you would have paid it all up in 50 months (4 years 2 months). At the 10% yearly interest rate you would be required to pay 10000*(1.1^4.167) = 14875. Thus you would be paying a monthly installment of 14875/50 = 298. You end up halalifying the modern interest based banking. Behind the scene it is still the same thing. Why? Because these banks apart from offering Islamic banking do normal banking. They are after all venture capitalists. I dont know of any 'viable' bank which is free of it. Bro Himy has links to Takaful bank of Malaysia. I guess he might shed some more light on it. wasalaam wrb labeeb. PS: My numbers are only example. My point was to emphasize they do backward calculation based on prevailing interest rate and package it differently. In fact at a higher cost because they end up actually dealing with more entities (in case they have to buy a house from seller and then resell it at profit back to you so total cost is more) . All big banks in Malaysia offer Islamic banking - Citibank (of USA!), Maybank, PerwiraAffin, BumiputraCommerce, AMDB etc. I dont know how widespread is this in Middle East. |
| Re: Questions about Interest |
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| bhaloo |
| 02/24/05 at 22:15:22 |
| [slm] The hadith Ember was alluding to was this one: The Messenger of Allaah (peace and blessings of Allaah be upon him) cursed the one who consumes riba, the one who pays it, the one who records it and the two who witness it, and he said: “They are all the same.” (Narrated by Muslim, 1598). Brother Labeeb, just to clarify something that was not clear in my initial post. The example I gave was one that I heard from LaRiba ( http://www.lariba.com ) The rental price is agreed at the beginning of the purachase of the house, and is fixed for the life of the "loan". The bank (in this case LaRiba) sets up a program of 10 years, 20 years or 30 years for you to purchase the whole home. They amortize your payments over the course of the life of the loan. (The amortization part is what has me concerned as this is essentially interest). And if for some reason you can't make the payments then you default on this loan. They make a huge profit, when you calculate the monthly payments versus a interest based bank's monthly payments, they are about 10% or more then the interest based bank's payments. I don't think there are really any viable solutions for Muslims out there, and its very disheartening to see this. |
| Re: Questions about Interest |
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| jannah |
| 02/24/05 at 23:59:22 |
| slm, If you check Guidance Financials website it shows how they set up a loan program for a house: http://www.guidancefinancialgroup.com/products/OurProgram.aspx "As part of the contract, you agree to purchase your co-owner’s share in the property through affordable monthly payments over a period of 15, 20 or 30 years. Your incremental acquisition of your co-owner’s share will ultimately lead you to full ownership. Your monthly payments will also include a charge for your exclusive enjoyment and use of the whole property. In total, these payments will constitute a fixed monthly amount that is competitive with what you would pay under a conventional mortgage." So while the end result is similar ie ur paying a certain amount a month in order to one day own your home it is not the same as taking out an interest-based loan!! And I have to completely disagree with br Labeeb, it is NOT THE SAME AT ALL. Not even behind the scenes. It may look like it externally because ur paying some money back as a loan but the similarity ends there. The main difference is that the amount is fixed and your installments are fixed in an Islamic loan. Thus say you buy a house that is $100,000 and then the bank fee is 7.5% $7,500.. over time you would have to pay back $107,500. Now say you take out a mortgage of $100,000 and the interest rate is 7.5% over a period of 30 years. You end up paying $151,717.24 IN INTEREST ALONE AND don't forget your $100,000 principal...!!! Put it into the mortgage calculator here to see the payments: http://www.lowestrates.com/mortgage-calculator.htm That is the difference that interest makes!!! Thus the poor end up paying exhorbitant amounts of money because they don't have the money RIGHT NOW. The rich have the money right now and because they have money right now they make even MORE money. Thus keeping the rich rich and the poor poor. This is the reason interest is haram. The interest system is designed to create and keep inequalities in society. It allows people to make money just because they have money on the backs of people that don't. It's really that simple. Most non-Muslims I know don't care if they end up paying double or triple for something as long as they can get it right now. So they buy new cars and end up paying double for it over their lifetime. They figure it's worth it because they can have it NOW as opposed to saving up. So interest also teaches this concept of getting something NOW and paying for it thru the teeth later. The Islamic system differs in that it doesn't allow the rich to exploit the poor (whether they realize they're getting exploited or not) and it also forces people who are hoarding their money to pay zakat on it.. This is like the exact opposite of interest! almost a reverse interest. This, over time not only helps the poor and needy but it re-distrubutes wealth in a society so that it's more equitable. I know a few weeks ago the UN released research (the Millenium goals report) that if only the richest countries of the world would spend .54% of their GNP over the next 10 years they could sharply decrease poverty in the poorest countries of the world: "About one-sixth of the world’s population still lives in extreme poverty, defined as survival on less than $1 a day, according to the Millennium Project’s Web site." "Today, development aid from the world's wealthiest nations adds up to .25 percent of their collective gross national products; the United States, the richest among them, provides proportionately the least, .15 percent, or only 15 cents per $100 of national income. Meanwhile, five nations already contribute 70 cents per $100 of national income, the 2015 goal set at the 2000 U.N. Millennium Summit." Imagine what Zakat could do for the world at 2.5% of WEALTH..... |
| Re: Questions about Interest |
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| bhaloo |
| 02/25/05 at 01:36:45 |
| [slm] Jannah, in the riba based system, the payments are fixed as well and you will pay much less then you do under these "so-called" Islamic systems presented by La Riba and guidancefinancial. In fact from the website you sited they say this: "In total, these payments will constitute a fixed monthly amount that is competitive with what you would pay under a conventional mortgage." Your paying about 10% more, maybe more, they aren't really competitive. I know someone that went through them and he admitted he pay more then a riba based loan. And the graph is not at all as they have shown on their website, it is VERY much like a riba based loan, an asymptote, not a steady line. The issue I have with these organizations is that they "amortize" the payments over the life of the loan. If they didn't amortize it, then there maybe some merit to what they are doing. I personally would like to see a viable solution for Muslims in North America and I don't think those insitutions do that at all. If anything they are ripping off Muslims charging them more then what riba based banks charge |
| Re: Questions about Interest |
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| Caraj |
| 02/25/05 at 04:23:14 |
| So based on this conversation, I am assuming paying it (such as on a home, auto or credit cards) is just as bad as charging it? (sigh) so much to learn and think about. What about businesses. Is there a way one should charge for their product? Are there rules and guidelines in the Quran for conducting business? |
| 02/25/05 at 04:23:50 |
| Caraj |
| Re: Questions about Interest |
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| labeeb |
| 02/27/05 at 23:06:43 |
| [wlm] wrb, Sister Jannah, please please I would like you to be my banker :D <<<"Thus say you buy a house that is $100,000 and then the bank fee is 7.5% $7,500.. over time you would have to pay back $107,500." >>> Here is the number that you would have to pay - [url=http://www.maybank2u.com.my/business/other_services/islamic_banking/maybank/bai_bithaman.shtml]Maybank Islamic Banking[/url] and click on "Islamic Banking Calculator" down below. For a loan of 100,000 RM, at averaged out interest (they call it profit ;) ) for 30 years term, your monthly repayment is 630 RM. Thus, you end up paying an interest of 126,800 RM. Plus, you owe the principle of 100,000 RM :) The reason why Islamic banking hasnt taken off is because nobody is interested in losing their earnings. It is logical to assume that any kind of business does has loss. Hence, when you enter into a business partnership you have to share profit as well as loss. The present world of dajjal/evil has created a system wherein people are accustomed to only collecting profits (interests). The result is in front of our eyes. The real rich get richer, poor gets further down the drain, those in the middle remain more or less there with few who generally go down the poverty lane if they messed up part of their life (it is not easy to come back from debt, once defaulted you remain so for the rest of your life assuming the amount is substantial say, a home loan etc.) It is a modern kind of slavery with the difference that it does not automatically get offloaded to kins and offspring in case of individual loans. But, lending to nations is a tool to enslave masses something which was not there in earlier times. The only way to enslave was to wage a war and you really had to be confident of winning because it could boomerang. The world was shocked to see victorious Muslims when it was truly emancipation of people defeated. Most as we know did not even fight and welcomed Muslims who were truly liberators in that people got everything that belonged to them and so much more. (The march of caliph Omar to Jerusalem was most striking. He enters the city on foot with his servant riding camel; and he did not pray in the church of the city fearing later generations of Muslims might usurp it and make it as a Masjid. He cleans up the place where prophet Jacob talked to Allah swt that was turned into a pile of garbage by Christians to tease Jews of the city.)In fact one can argue the present turmoil, the conflicts, the hatred of people against each other all has the root cause of the modern financial system. Did you read that after Afghan war the western world gave them loans of millions to re-build the nation. Even if it was given at no interest (which is not true) how could one suppose the people of Afghanistan not to default when in the last 20 years they have only seen unjust occupation and war, and this would ultimately be a huge burden on the rest of the generations. And, most of all these 'inhabitants of hell' put a puppet who has no wish to see the people become prosperous, he would only squander this newly gained money on himself and his toadies and remain in power by hook or by crook. The same story is repeated all the time in all the non-western countries. Yet, Allah swt has given us Muslims truly Manna from heaven (the abundant wealth/oil/gold etc) in that we have it within our reach to get out of this vicious cycle of riba' (interest based lending) yet we find ourselves not doing enough. And, this is truly a test for Muslim ummah and we have failed miserably on this, and we are facing humiliation/defeat at the hands of unjust aggressors. We do not ponder over what would it be like if Muslims did not have this wealth from Allah swt, I cant imagine. And look at the time when it was made available to us. Enmity was sown among the colonialists that they fought themselves at such a scale that was unseen before (the so called world war), and thus they were made to leave the nations that they had occupied. The British left Nigeria in 1960. A couple of years later oil was found in the northern part where Muslims live. Allahu Akbar! Yet, to this day Nigeria is one of the poorest! I have digressed a lot rather rambled. But, back to the topic as I mentioned <<<Because these banks apart from offering Islamic banking do normal banking. They are after all venture capitalists.>>> That is to say, it would be a pleasant change if they are really utilizing money in Islamic way which they dont. And, as brother Bhaloo pointed out that we often end up paying more. And, I would be happy to do that if I see myself doing my bit to help build a viable Islamic banking. But, it should be real and not fake. The difficulty faced is because as I pointed earlier, we are accustomed to thinking we cant lose money and end up losing much more! Your idea of nations paying zakat to the poor countries is a very good one. If God willing, it dawns on people to really resolve the world conflicts this formula would be acceptable to all and we could live in peace and in universal brotherhood. Ameen! Take care and wasalaam wrb, labeeb ;-) PS: Sister Azizah, doing business is an activity that prophet Muhammad (saw.) himself participated in and he encouraged people to work in trade and commerce. The early Muslims used to traverse distant lands for the purpose. In fact, Islam came to East Asia, East and West Africa through these Muslims. No Muslim army ever entered these territory. And how could they do it? Because they were the most upright Muslims and followed the Islamic ethics of business. Here is some more info for you. http://www.islamist.org/images/ethicshm.pdf |
| 02/27/05 at 23:09:05 |
| labeeb |
| Re: Questions about Interest |
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| timbuktu |
| 02/28/05 at 12:18:16 |
| [slm] jannah, would the bank be prepared to share in the loss if property prices fall, or the property suffers damage. Ziaul Haq introduced the Profit and Loss sharing system as an alternative to the interest system, butbehind the scenes it was the same as interest, because to popularise it, the government underwrote the return on deposits. The losses were felt when loans to the big sharks were written off, and banks started to fail. They were nationalised banks, and the government did some tricks resulting in loss to the public money, and loss of jobs. Private banks were no better. The money was funnelled into the rich guys account. The paper money system is guaranteed to cause inflation. Is there any insurance against this? and there are still some people who avoid interest, and make good money. I think labeeb's post needs careful reading. |
| 02/28/05 at 12:19:53 |
| timbuktu |
| Re: Questions about Interest |
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| Mossy |
| 02/28/05 at 19:36:14 |
| www.e-dinar.com? Murabitun may be scary at times, but they do have a good initiative.. |
| Re: Questions about Interest |
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| Caraj |
| 03/03/05 at 16:47:20 |
| I'm going to read back over these posts cause I'm missing something here. OK a bank is like any busines, and it is to earn money as is with sewing or food or such. If they do not charge interest on loans nor give interest. What is a persons motivation to let someone elses use their money? (Outside of the poor) How does the bank pay its employees and electric and water biils? Rent? I know a fee for a loan can be charged but is this not interest under a different name? And is it wrong to expect a company to pay you for the use of your money? Just questions and thoughts. |
| Re: Questions about Interest |
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| sal |
| 03/03/05 at 19:24:37 |
| Well, I don’t think banks so far could avoid the RIBA entirely even here in Saudi Arabia although the banks do not totally depend on riba in all transactions There are ways they say is Islamic but its not clear so far with the confusing justifying banking terms and reckoning Some bank clients do not take the interest from the banks and scholars say this can be taken but not used however be given to the poor just to get rid of it and not rewarded as a charity. This way the individual has a way to deal with the bank at the same time can avoid the RIBA Banks actually gain much profit from different bank movement and they could only diminish their annual profit if they want, but I think it is hard to give up such huge money (not an excuse) plus foreign banks has shares. This makes them use different naming and computation as self deceive only But the strange thing is the gold RIBA People know there is ISLAMIC way of trading with gold different than any other stuff, which is easy to do, but they still are involved in this Individuals and companies can all avoid that since there are many other options but they want more and that is the case When I asked a gold stores owner why they don’t use the Islamic way free of RIBA his answer was, OH always RIBA …RIBA .for everything I know and he knows how but he didnt want to listen which indicates there are many ways of riba free bussiness and deals but people do not want ;) |
| Re: Questions about Interest |
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| Angelic |
| 03/04/05 at 07:00:57 |
| salam There were studies a long time ago in Pakistan, they were having a hard time trying to make the system work because all financial institutions in some form of another have to deal with the rest of the world, and no bank in the rest of the world will do business without receiving some sort of profit. As Salem said, In Saudi Arabia they are not completely devoid of it either. The financial institutions there operate in the fixed income securities market which deals in the buying and selling of debt such as bonds which are sold based on a return of interest. The most important issue I find with these islamic banks is where are they getting their capital from to lend out this money? usually they are borrowing it themselves because they don`t really have enough deposits, some people reckon that if you as a borrower with this bank don`t know about this that it makes it halal, however, from my own research we are delving into a very grey area and the muslim community hasn`t really provided an alternative to us muslims when one needs to borrow money or want to own their own home. Also, in the Quran itself there are very few references made to riba and those references only imply that we should not charge interest, when I`ve spoken to other people about this they said that is true but there are hadiths that say we should not accept to pay it either but I don`t have any hadith books to pass judgement on this. salam Angelic |
| Re: Questions about Interest |
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| humble_muslim |
| 03/09/05 at 13:16:12 |
| AA I'm using Guidance Financial to finance my house. At least I have peace of mind. |
| NS |
| Re: Questions about Interest |
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| Ember |
| 03/10/05 at 09:58:58 |
| [slm] What is Guidance Finance??? |
| Re: Questions about Interest |
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| Ember |
| 03/10/05 at 10:15:02 |
| [slm] Article I found on this organization http://www.usatoday.com/money/perfi/general/2005-02-24-islamic-finance-usat_x.htm They don't have a website, do they??? Dream fulfilled helps Muslims realize theirs By Elliot Blair Smith, USA TODAY PASADENA, Calif. — On a sunny afternoon, Yahia Abdul-Rahman ignores the broken air conditioner in his mortgage-finance company's cramped Southern California office. Around him, three-dozen employees, some of them Muslim women veiled in scarves, toil amid the rising heat and stacks of paper clutter. Yahia Abdul-Rahman reads the Koran outside the Al-Fatiha Islamic Centerin Azusa, Calif. By Robert Hanashiro, USA TODAY Chief lending officer Syed Rehman, 64, his crumpled white shirt rolled up to the elbows, is attempting to close a loan in Urdu, the language of his native Pakistan. In English, he complains that his crowded corner, which he shares with two assistants, is "boiling." But the boss, Abdul-Rahman, 60, is as cool as his blue-green eyes. The CEO and founder of American Finance House-Lariba already has succeeded in two previous careers, as a chemical engineer and financial planner. Now, he is creating his legacy in a third: Lariba is among a handful of lenders that dominate this country's small but growing $600 million Muslim mortgage market. Governed by the Islamic religion's sharia laws, which prohibit earning or paying interest on borrowed money, the market is expected to double in the next few years as American Muslims with conventional home loans look to refinance with Islamic products. Lariba's interest-free mortgages resemble lease-to-own contracts. Buyers build equity while paying rent and principal. One difference: Lariba homeowners immediately take title while the finance company retains a lien. Its competitors offer variations. "We are not run-of-the mill marketing people who find a niche and run with it," says Abdul-Rahman, elegantly attired in a dark suit and sleek tie. "We are humble servants of the community." Muslim mortgages Under Islam's sharia law, which guides moral conduct, interest-bearing income and debt are considered sinful. But financing may be arranged to incorporate negotiated profit margins and fees rather than compounded interest. Ijara-wa-Iqtinaa: Lease to own Home buyer acquires title to property while financier retains a legal claim to the investment. Buyer's monthly payments to financier include lease and equity components. Title transfers at end of contract. Murabaha: Installment purchase Home buyer identifies property and negotiates price, but financier executes transaction with seller. Financier immediately resells property to end buyer on installment-payment plan at pre-agreed markup. Musharaka: Co-investment Home buyer and financier are co-owners through a partnership entity such as a limited liability company. Buyer's monthly payments consist of rental and equity components. Over time, buyer's equity grows. Source: USA TODAY research Not 3˝ years after the Sept. 11 terror attacks put the U.S.-Muslim relationship in sharp focus, the nascent Islamic finance market is undergoing profound change. U.S. authorities have identified several Muslim charities as terror-financing fronts. And scandals have erupted at two banks with ties to the Middle East: Arab Bank in New York and Riggs National Bank in Washington, D.C. But the attention also is contributing to the modernization and development of some ancient articles of faith. Islamic mutual funds and even hedge funds are beginning to flourish, as are interest-free mortgages and business loans. The nation's estimated 1.1 million American Muslim households, long deprived of sharia-compliant financial products, are benefiting as a result. Rushdi Siddiqui, director of the Dow Jones Islamic Index Group, which tracks sharia-compliant investments, says, "Frankly, with 9/11, as with any tragedy, there was a silver lining. One of the silver linings ... was a revival by Muslims to look inward to how they can be more compliant (with the Islamic faith)." As a result, he says, American Muslims have become better educated about alternatives to Western financial products. The trickle of new capital is changing people's lives. In Sacramento, hospice physician Khurram Ali, 37, a Pakistani immigrant, was living in a rented apartment with his pregnant wife and young son when recently he found a $383,000 house for sale near a Muslim mosque and school. Having gone without Muslim comforts during the 41/2 years he practiced medicine in South Dakota, Ali feels at home in California. But he was unwilling to buy the property without an interest-free loan. "I felt so strongly that if we were not able to get financing — which was possible — we were going to stay in our rented apartment," says Ali, who paid Lariba an "implied" interest rate of about 6% on his loan, making it slightly more expensive than conventional mortgage rates. Lariba's implied rate reflects the rental income and any transaction fees calculated as a percentage of the purchase price over the life of the lease-to-own contract. It is tax deductible to the homeowner, just as mortgage-interest expense is to conventional borrowers. In central Los Angeles, Fouzia and Asfaq Shabandri — Muslim immigrants from India — recently acquired their fifth KFC franchise with interest-free financing from Lariba. And in Cedar Park, Texas, Altaf Hussain, 43, a semiconductor marketer, just purchased a $475,000 house for his family through Lariba. "With our kids growing up, we wanted to set an example for them," he says. "I wanted a competitive rate. But, to get out of paying interest, I would have been willing to pay a little higher to get into a Muslim mortgage." George Bailey's lesson Abdul-Rahman, an imam — or Muslim scholar — likens himself to the small-town banker with a good heart played by actor Jimmy Stewart in It's a Wonderful Life. He screens an edited version of the movie for new employees and often retells the hallowed Hollywood tale of how townsfolk who invested small savings together created a better life for all. Since Lariba's founding in 1987, in a room with a broken window over Abdul-Rahman's garage, the state-regulated finance company has underwritten more than $200 million in automobile, business and mortgage loans. It originated nearly half that total in 2003, the most recent year for which Federal Reserve data are available. In turn, secondary-mortgage marketers Fannie Mae and Freddie Mac purchase the mortgages from Lariba for their portfolios, recycling cash back into the business. Last year, Abdul-Rahman took the helm of a small national bank, the Bank of Whittier, with $26 million in assets, as a vehicle to expand into 49 states. Clients who require more funds or more competitive terms than Lariba can provide are referred to the bank. Competitors: • Guidance Financial Group in Reston, Va., a sharia-compliant mortgage finance company founded by French-Syrian economist Mohamad Hammour. It is building a nationwide retail presence, supported by funding from secondary-mortgage marketer Freddie Mac. Guidance Senior Vice President Rehan Dawer likens the swift development of Muslim mortgage products in this country to the advent of bottled water: initially expensive, eventually indispensable. • Devon Bank in Chicago, a Jewish family-owned bank, launched Muslim real estate and business-loan products in January 2003 in one of the country's most diverse neighborhoods. It joined a handful of traditional financial institutions, including HSBC in New York and University Bank in Michigan, in exploring the Muslim market. Bank attorney David Loundy, a son of Devon's founder, says he solicited approvals from federal banking regulators and the Sharia Supervisory Board of America for the bank's Muslim mortgages, which now account for half of its small but fast-growing mortgage portfolio. He also developed savings accounts that replace interest income with profit sharing. The deposit accounts await Securities and Exchange Commission approval. • Several Muslim-Americans, including principals of Samad Group in Kettering, Ohio, and Shape Financial in Falls Church, Va., are developing other sharia-compliant financial products. Abdul-Rahman, the son of a former Egyptian undersecretary of education, came to the USA as a chemical engineering graduate student at the University of Wisconsin in February 1968. He had $17 in his pocket and no scholarship. With a job as a teaching assistant, he earned master's and Ph.D. degrees. He was destined for good fortune. Upon graduation, Abdul-Rahman joined oil company Atlantic Richfield, later Arco, in Texas, and earned several patents for his work extracting oil from shale. Living well His ability to predict commodities prices eventually led him to create his own energy-trading firm and to be named to the board of a local bank. He came to live in one of Houston's biggest houses, in one of its best neighborhoods. "I used to make a seven-figure salary and bonuses," Abdul-Rahman observes. "(But) by the 10th day of the month, our account was empty. My wife used to say: You must be married to somebody else. Where does the money go?" His wife, Magda, says 70% of their income went to pay for their fancy house, which they financed with a conventional bank loan. Meanwhile, at bank board meetings, he grew uneasy after learning that some directors were defaulting on their loans to the institution. It was 1983 and the Texas oil bubble was about to burst. Convinced that a crack in property values would follow, Abdul-Rahman listed his house with a real estate agent for $565,000, even though an enraged neighbor was listing his at $800,000. The couple moved into an apartment. "Our friends would come and weep and cry" over the apparent reversal of their fortunes, he says. Meanwhile, the neighbor's asking price fell by two-thirds. Abdul-Rahman moved on to a job in Southern California as a private banker at Shearson Lehman, a predecessor of Citigroup Smith Barney, and he applied his money-raising skills to underwriting Muslim mosques and schools. He launched Lariba with the help of about 20 Muslim investors who raised $200,000, enough to finance one interest-free mortgage. "I said, 'Put in $10,000 (apiece), and if I lose it, don't hate me for the rest of your life,' " he recalls. In the early days, Lariba financed a home or car purchase only once every six months. But over time, Abdul-Rahman built a profitable business. The big breakthrough came in December 2002, when Fannie Mae pledged to purchase $10 million of Lariba's mortgages. Fannie Mae account manager Colette Porter says Abdul-Rahman's efforts fit a broader trend. "Faith-based organizations have become trusted (financial) advisers in underserved communities," she says. With Fannie Mae's support, mortgage loan applications at Lariba doubled from 27 a month in 2002 — to 54 a month in 2003, according to Federal Reserve data. At Guidance, the climb was faster. Its mortgage applications soared nearly tenfold to 123 a month, totaling $278.9 million in 2003, up from just $22.4 million in 2002, its first year of business, according to the Federal Reserve. Mortgage applications don't constitute lending commitments, but most applications in the Muslim niche are funded, market analysts say. Through 2004, Guidance says, it has funded transactions totaling $400 million. Due to this push, Muslim mosques, newsletters and TV channels now are abuzz with talk about Islamic finance. It convinces Abdul-Rahman that he is living the lead role in It's a Wonderful Life. Next, he hopes to reach a broader market. "What we're trying to preach here is common sense," he says. "Live within your means. Never just follow the crowd." |
| Re: Questions about Interest |
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| timbuktu |
| 03/10/05 at 10:16:38 |
| [slm] Guidance Financial is a company in the US that says it provides finance based on the Sharia: http://www.guidancefinancialgroup.com/home/home.asp bro. HM can provide some light on his experience, and I guess what the company has to say can be read on its webpage. |
| Re: Questions about Interest |
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| MIT |
| 03/13/05 at 15:53:07 |
| assalaamu alaikum Download this lecture. Dr Yasin's findings are quite interesting: http://www.jimas.org/mp3/conf0407.mp3 |
| Okay, I'm late with my payment, I mean answer to t |
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| SuperHiMY |
| 04/18/05 at 05:04:46 |
AsalamAlayKum, Peace and e-Greetings be upon you all. In the past, that is from 1997 until oh, I guess 2003ish, I was the one on this message board who usually answered all the Islamic Banking Questions. What makes me qualified to do so? Without being humble about it, but after tons of work, I have what I will confidently say is the [i]Second Biggest[/i] Islamic Banking And interest-Free Finance website and website about Riba and Gharar on the internet: http://www.IslamBank.Com I call it The IslamBank.Community First off, I woulda been answering this question right away when it was posted as of Late, I reduced myself to lurking rather than HiMY-Humour-Trolling. In that time, I'm halfway in doing what I'm calling 'The Big Update'. (Viewers of the cancelled C|Net Show 'Internet Tonight' will recall 'THE BIG LIST!!!!' That's where I got the idea from). Second, I have answered these questions again and again and again, but I have honestly after all these years, never found a better answer than this one: http://www.IslamBank.com/index.php?name=EZCMS&menu=2&page_id=2 Why that? Because it does several things all at once. 1. It answers EVERY immediate question about exactly WHAT Riba is. What isn't. 2. It anticipates the ANSWERS to your next eventual set of question that will creap into your consciousness over the days and weeks after first getting 'the correct answers'. Who's whispering that mumbo-jumbo that 'islamic-banking is just like riba-banking'?? Mr. Shaytaan of course. And for the sister's out there, Mrs. Shaytaan. 3. It is ONE HUNDRED standard printer pages when printed out. 4. I recommend you print it out. Spend some time here and there over the next day or so and finish reading it. Reading requires a serious non-interneting time away from the 'puter. Give yer eyes a rest. 5. Last but most importantly, with printout in hand, now that you're 'converted' back to understanding that RIBA is haram and Zakat-Based Money is Halal, your muslim buddies and neighbours who you, in your new anti-Riba enthusiasm will share your excitement towards, will hit you up with 'how do you know?' Show 'em The Text of the Historic Judgment on Interest Given by the Supreme Court of Pakistan and they go back to your XBox and iPods. I just posted an article on my website how Scottish Riba Based banks hurriedly in a dash before the British election call, squeeked through a technical legal change on eliminating the 'double stamp duty' when Islamically Financing a house north of the English border (Scotland is a separate country) home to 60,000 muslims. Am I typing too much here? Is anyone of y'all readin' this ?? I dunno, but it's 1:27 am, and I'm still typing... In a snapshot, Canada now has SEVEN Islamic Financial Institutions. The UK has a complete stand alone 'Islamic Bank of Britain' plus three other 'Islamic Banking Windows', that is Interest-Banks offering Islamic house financing and profit/loss sharing from those Islamic House Purchases deposit accounts. The U.S. has at least nine by my count 'Islamic Financial Institutions' or IFI's. Hardcore muslims who hate Riba and work at 'Islamic Banks' hate the word bank. It comes from italian, for table - Bango. Where the moneychangers would do their 'gharar' or uncertainty-ripping-off the folk who changed their money on the table. Hence IFI's it is. Of Course Malaysia is leading the world in Islamic Banking. Period. Bottom line is: Money can not be rented. Rent can not be collected from money. STuff must be bought by someone. The owner can then rent that stuff out to whoever is able to come to a mutual agreed price. If at the end of the day, the numbers work out to be EXACTLY the same regardless if one rented money or one rented the stuff, renting the stuff is allowed under shariah, hence Shariah compliant, and renting the money is incorrect under the Shariah. BUT the common complaint is 'the price is the same so what's the difference??' The difference is now that Interest-Based lenders and Riba-Banks see an underserved market of on the whole, above the median, income earners who have usually taken on the minimum amount of RIBA and Gharar that their conscious could live with. There is a pent up demand from all we monotheists to better the money aspect of our lives that we have been holding out on. The Ijara model of house financing, lease to own. And Diminishing Partnership, or musharikah model, is a rent to own model. The two approaches are different and for the most part one of the models will satisfy your tax situation, hence lower money due to Uncle Samuel in D.C. These two models, have by due diligence over 25 years, become standard contracts. Hence the current and about to happen 'global explosion' in Islamic Banking Windows at Interest-Banks with what I call 'Off the Shelf Islamic Banking', where Interest-Based Banks, call pull out these halal contracts from their neighbourhood muslim lawyer, and in bankerlingo understand how to finance their 'moslem' customer who comes to them asking for interest-freedom. Look, how many muslims 'understand' macroeconomics? Or even know that there are 70 or 73 (depending on your choice of strong/weak hadith isnad filter) DIFFERENT types of RIBA? These IJARA and MUSHARIKAH house contracts not only hafta get rid of the 'everyday interest' that most muslims are knee deep in yogurt at the moment with, the shariah scholars over the decades have nuanced each detail technical and arcane that it may be, to ensure the 'other' 69 or 72 types of RIBA (And Gharar and MAysir{gambling}) you ain't familiar with, that those kinds of RIBA are also eliminated from the paperwork. 1:50 am... no one's here reading this right? I have work to do, but I have few people to talk about this here with, I'm in the San Francisco Bay area at the moment, not my hometown of Toronto... SEven years ago, at that time, the managing director of the world's biggest Halal Mutual Fund listened to me for three hours and agreed to completely finance my teenagehood dream of a completely Islamic Credit Card. I had developed the model one afternoon when I was 16. I spent the next 11 years, on and off, meeting scholars and Muslim economists and Islamic Bankers to 'confirm' my model. It was so complicated, no one could see the 'one' single tiny, itsy, bitsy, microscopic thing wrong with it... actually only unless the card programme was up and running could the 'gharar' problem appear that I had missed... ELEVEN years... and in my gut I knew I had missed something. I finally 'found' an Islamic Shariah Scholar from The Sudan, who because of being more familiar with retail islamic banking at the ground and personal level immediately saw my 'technical glitch'. I knew I was wrong!!! I just didn't know where...then I did. In houston in may 98 at that Banking conference where 400 muslim from the general population showed up and surprised the heck out of all of conference attendees.... I digress... Look, the contracts, if you don't understand it, I'll offer this up: If anyone's still here reading this month old threadamajigamabob... Ask me direct questions, I try my best to be succinct, and answer your query. Deal? Anyone? Anyone? Anyone? Bueller? Bueller? Bhalooo??? |
| interest |
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| timbuktu |
| 04/18/05 at 06:14:08 |
| [slm] OK, bro HiMY, here are my questions. If you have answered them on your site, I have not been able to read your site, because the font is too small, and trying to change the font size hasn't worked. Q1. The government borrows money from the public through Defence and other savings schemes. It gives you a return that turns out to be less than the inflation rate. inflation or devaluation of the paper currency is a big problem. What does an ordinary person do in such circumstances? Secondly, investing your money with private individuals or companies hasn't worked. So far, these people either run away with the money to the West, or cook the books, and one is left with almost nothing. Q2. The government and some large scale employers provide pensions and something called a Provident Fund. It must also involve some interest, but the same question of inflation arises here. What should an employee do? Walk out at end of his employment empty-handed, or accept this Provident Fund, and pension? |
| 04/21/05 at 08:46:48 |
| timbuktu |
| interest |
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| bhaloo |
| 04/18/05 at 09:41:15 |
| [slm] I'll read the lecture later insha'Allah, but the 2 questions I had were the following. 1) MIT had mentioned sometime ago that he attended a lecture where the scholar mentioned that if you borrowed $5 from someone and then paid back the $5 a few years later, that was actually a riba transaction (I don't understand how that is possible, and never pressed MIT to explain it further, maybe he'll explain it now. ;) ). 2) All these so called Islamic financial places like Guidance Financial, La Riba, etc., they amortize the amount of the "loan" for a fixed period of time (like 30 years for a conventional loan). Where you are paying very little towards the principal of a home in the early years, just like a riba based system. It doesn't make any sense. |
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