Accountancy Forum

<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Pracs</i>
<br />That may not be entirely true, I believe that we need to look at the mechanics of the contracts and incidence of interest. Say in this case, if the 200,000 is say linked to an inflation index plus a fixed margin for the bank (which is the case for any other kind of trading), now this may be quite in line with an inter bank rate say LIBOR (because believe it or not interest rates are a reflection of forces of economy and money!). Now this could be a shariah compliant funding if

The bank purchases the car and then sells it to the customer (having transferred risk to itself), ofcourse the car could be insured (bank bears the cost. In case of default from the customer or say an accident. The bank will have to bear the risk ! i.e release the customer of the car (charging a fee for early release) sell of the car or get the insurance money, retain its share and return the balance to the customer.

This may sound very familair but this is usually not the case in most leasing transactions. I believe there is a thin line that makes a difference between a shariah compliant instrument and an interest bearing one.

PLEASE note that the above is just for academic discussion and I am no authority on shariah compliant instruments.

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SALAAM..ALL
AZIM BHAI AND PARCS I APPRECIATE YOUE COMMENTS......
I'M WITH YOU....
I LOGGED ON AFTER MANY MONTHS DUE TO BULK OF WORK...
STILL ITS.. OPEN.......AND I THINK IT WILL REMAIN STILL...
I DONT WANTTO MAKE FURTHER ADDITIONS ON PART OF RELIGEN..
LETS TALK GENERAL......
I KNOW TWO FRIENDS, FROM SAUDIA AND ANOTHER FROM DUBAI...
ALL KEPT GOOD POSITIONS IN EMIRATE AND SOME SAUDIAMERICAN BANK...
IT WAS ALL GOING FINE, UNTIL THEY STARTED TABLEEKH AND FATWA ETC...
FINALLY..... BOTH LEFT AND WENT TO PAK.....
THEY USED TO SAY......."WE LEFT BEHIND WHAT WE USED EARN THRU HARAAM EARLIER"...
NOW......AFTER 3 YEARS....... THEY CANT FIND A SINGLE JOB, EVEN WITH REFFERENCES ETC...
COULD IT BE A WAKE-UP CALL FROM ALLAH... I DONT KNOW.....
BUT, WHO ARE WE TO DECIDE HALAAL AND HARAAM....
WE ALL SHOULD FOLLOW OUR IMAAMS....
AS A WRONG TEACHING BY ONE, FIRSTLY MAKES HEM ACCOUNTABLE TO ALLAH.....
GOOD WISHES.....
SYEDHASSAN...

ACCA

Hazoor (PBUH) used to borrow money from a Jew. Even when Hazoor (PBUH) passed away, he owed money to that Jew and he instructed how the loan was to be settled. Could someone please find and post the terms of that loan on this forum. I think it will answer a lot of questions.

<blockquote id="quote"><font size="1" face="Verdana, Tahoma, Arial" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Goodman</i>
<br />Hazoor (PBUH) used to borrow money from a Jew. Even when Hazoor (PBUH) passed away, he owed money to that Jew and he instructed how the loan was to be settled. Could someone please find and post the terms of that loan on this forum. I think it will answer a lot of questions.
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hi all......
yes sure we should look a little more than what we normally do..
i think thst even if we follow SAHAH-ALBOKHARI...
we find that HUZUR (S.A.W)...had once borrowed money from JABIR....
as the PROPHET verymuch needed it..and also did return it with some extra amount...i think 3 people posted and many also read it...
and the law of necessity is the GLORIOUS QURAN is in SURA-ALANAHM...Para-5....and we all know that....
ISLAM is a complete code of life and PROPHET MUHAMMAD(S.A.W)is a complete QURAAN... and the AAYAH ARE FOR THOSE WHO CAN THINK or HAVE SENCE...
so...... i dont think that job of a banker or some finance job should ever be called PROHIBITED...


ACCA

I've read this thread - and as a Roman Catholic - I find this discussion to be rather academic to be perfectly honest.

The fact of the matter is that Islamic financial institutions while not using the word interest, do charge a levy/surcharge on borrowings.

We can get tied up with semantics about whether this extra charge ought to be called usury/interest/surcharge/levy.
It makes no difference the fact is that the borrower has to pay the excess amount over the capital sum borrowed, regardless of it's description.

Religion and Commerce are separate folks.

As Jesus Christ said "Give unto Caesar what is Caesars, and give unto God, what is God's".

Well not exactly, its more complex than that. The fee for service is more of for the service or for the use of a product. Interest in the form of compunding and 'fixed' component of a loan is you may agree more taxing and unfair.

Infact the practice of regualting interest and monetary policy is more of an Islamic regualtion. Where the state (Bank of England, Fed) regulates interest rates to ensure adequate economic activity.

Well it is quite a long discussion, but in Islam commerce and relegion are one. Infact Islam is not just a relegion it is more appropriate to refer to it as 'DEEN' or a way of life.

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"Failure is a word unknown to me" - M A Jinnah

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Y is the WorLd so full of ..........FOOLs ?????? n y am I one of them (
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I agree with you, lender should not feel the burden and must be reimbursed with the current value of the money matched with value when origionally extended to the borrower.Calling it haram seems kinda awkward (i'm not referring to Quran), rather the concept that has nurtured over the decades regarding Interest free banking etc etc. So the point is both the Lender and the borrower must enjoy the constant value of money without reduced value of money at the time of due date.Still, there is a point what if value of money appreciates after the tenor? Should he be reimbursed with Less money equalling the origional value of money?If we both Stick with our views, surely we got to do this then.still matter need to be resolved)

I think the problem is, everyone needs to read the quran with understanding. And develop a critical mind.

What does it mean by Riba? Give me an example, as in the quran.

Now what does it mean by interest? Give me an example.

If someone defines interest as profit, does it make it halal?

I will recommend this book to everyone Asking the right questions, a guide to critical thinking by M.Neil Browne. This can be found on the amazon website.

www.Quran.nu - The free online Quran with translations (tafsir).

Thanks

Salam Brothers

I came across this thread a few months ago, I had like many on here an opinion but not much knowledge of the issue so I didn't want to fully engage in the debate. I have read a few books on the issue and feel maybe I can now say or quote somethings of use.

Morals, rights and wrong have no material assumptions from which we can deduce rulings on whether something is right or wrong. Quran and the prophet(pbuh) have thus been sent to us to differentiate between the two.

We have two kinds of people with no knowledge here.
1. The ones who say Interest is haram and there is no further debate even though they haven't read into it.
2. The people who consider themselves modern and too advanced to listen to what the Quran says and when they do they will argue about changes with time...etc. They tell people to go and learn about the Quran before saying Interest is halal or Haram but they are reluctant to do so themselves.

Riba is not just related to money. If you use just X to make more X than that it is Riba. Interest makes money from having money thus perfectly fits into the description. By it's very nature the economic system based on interest makes the rich richer and the poor poorer. Having money makes money and not having money takes more money. This in total contrast to the islamic economics, which believes in the circulation of wealth through the whole population.

100,000 people are set to go bankcrupt this year here in Brittain alone due to credit cards. Half the world is in poverty because the poor countries cannot get past paying the interest. The 10 richest men in the world are richer than most of the countries. This is not fair.

People now a days feel that interest based banking is inevitable in the field of trade and industry. So they claim that only Usuary is Riba and commercial interest is Halal. This view isn't based on Islamic knowledge but the concept I mentioned above which rules that progress without such a system is unimagineable.

Commercial interest was around in the time of the prophet as different tribes used to give loans to each other and earn interest on them. Tribes in those days used to act like modern day businesses where everyone in the tribe used to carry out some task in whatever goods the tribes were famous for producing. The interest between the tribe is recognised as Riba.

By giving away an interest based loan what you are doing is securing your asset and the income from the asset but passing on the risk of a loss to some poor and desperate individual or business.

We do not need interest and the enormous expansion of islamic banking has proven this.

The muslim scholars are divided on the issue of inflation I see it as thus
- Personal loans are never so big for inflation to ever come in play as usually personal loans are made on a very small time frame.
- Commercial loans cannot be made in accordance with Islam thus instead of giving out loans the banks should invest in projects and earn back from the profits. This will reduce the number of risky investments made and will force further development of business plan analysis.
As the banks will be making an investment they are also taking the risk of inflation so the borrower doesn't need to take that into account.

Books recommended-
Meezan banks Islamic Banking, Dr Muhammad Imran Ashraf Usmani
Issue of Interest, Maulana Mufti Muhammad Shafi

Brother kay106

A better book than the one you have recommended is the Glorious Quran
Here is what the Quran says in reply to your question about interest being profit.

Surah Al-Baqarah Verse 275
Those who eat Riba will not stand (on the day of judgement) except as a person beaten by Shaitan leading him to insanity. That is because they say "TRADING IS ONLY LIKE RIBA" where as Allah has permitted trading and forbidden Riba.
So whoever recieves an admonition from his Lord and stops eating Riba shall not be punished for the past as his case is for Allah and whoever returns to Riba, such are the dwellers of the fire, they will abide there in forever.

Islamic banking is a way past the problem of Riba. Lets give it a try and if it doesn't work than on the day of judgement we can say that the Riba we took was the only way for us. But first lets give the way which is clearly islamic a try.

Finance

Yes the islamic system does indeed take excess over the borrowing but the rights and obligations which are set are totally in accordance with Islam and thats what makes it different.

An example being the Islamic answer to mortgage. The mortgage is replaced with two different contracts. One being the contract that the lender will give the house to the customer if the customer manages in installments to pay of the price of the house so it is a sales deed.
Second being the house rent deed.

In this way the bank is not making money from money but from the house. Their income is dependant on the house prices and other economical factors. If the house gets damaged the bank loses their investment, in normal mortgages it is the borrower who has to pay the bill and keep up the interest payments.

Thus the banks money is safe, their income is safe and the risk of loss is passed onto the borrower.

I havnt read all the replies but
THIS LoGIC!
(First of all I would like to congratulate you on joining ACCA.I am also a student of ACCA.

I totally agree with you on the matter you have discussed/asked.My Concept is that the person who lends money has the fundamental right to enjoy the same facilities of money lended by him to the borrower after the decided period of time.
In Islam I think that both the parties are considered not to bear any additional burdon of money by both the lender and the borrower.

This was my view , but if you have any other information then please let me inform about that because for sometime I myself remained quite puplexed on this issue.)
AND The very first.
Islam beleive in the rotationa of wealth from rich to poor if they r allowed to charge a interest so rich get richer n poor remain 8 the same position
the intension of lending the money shud b just a help to improve the life standard
everyone is free to poz any type of query no supposed to get sad

"My Concept is that the person who lends money has the fundamental right to enjoy the same facilities of money lended by him to the borrower after the decided period of time."

Very true Sidiqui
but when you lend money to your relatives or friends it is generally a small term loan of small value and thus inflation wouldn't have that much an effect on it.

well, i didn't understand whats going on & also was unabale to find out the conclusion to the topic. I don't know much about the Islamic prospective of interest that vary from case to case. But according to renowned religious leaded who is having a lot of investments arround defines "if you do any business where there are even 1% chances that u will suffer loss is not haram and vice versa."

Dear All,
Asalam-O-Aliakum

I suggest that we should always try to consult these matters with scholars. I have attached a link from Dr. Israr Ahmed, may be this can help us better understand this topic
http//www.tanzeem.org/online/ebooks/Sood-hurmat,%20khabasatain,%20ashkaalat.pdf

Regards,