Accountancy Forum

In pakistan banks are not allowed charged interest. Instead they charge a profit or what is known as mark-up. Can anyone please tell me how does mark-up diifer from interest. I dont see any except for a change in word.
Secondly if mark-up and interest are the same, people would say that it is haram. Can our economy survive if this concept of mark-up is disallowed? Those of you who do think that we can survive, please elaborate as to how?
Finally, what about investments in stock markets? Are they really halal? If people invest in the market expecting returns, they're basically investing in the company wanting a share in the profits. Isint this concept similar where a bank gives an individual or a group a loan wanting a return in there investments?

This topic will include a lot of disagreements and 'arguments' rather than discussions.

The beliefs of different sects of our society vary but not largely regarding interesting.

However, there is a huge difference in 'Interest on Loans' and 'Interest on Investments' and that's how mufti's will usually explain you what is halaal and what is haraam.

In Karachi, the Al-Meezan Bank, which offers Riba-free banking, has some religiously learned people who are always present in banking hours to answer your questions and explain everything very clearly.

I recommend everyone to visit them at least once to clarify such issues. This is how my family got rid of confusions regarding riba as well.

Hi Evolution!
Investment in stock markets and bank loan are very different.
Bank loans charge interest not on the expectations of profits but on a host of other factors such as length of time, collateral, current interest rate markets etc. This interest has to be paid irrespective of whether the borrower makes money or not. However, in stocks markets, company pays divdends(a share in the profits) when they are profitable themselves or expected to be profitable in futures. Dividends are not guaranteed like interest payments. If company is unsuccessful, then its shares prices go down and the investor shares in the losses indirectly.
As far I know all major islamic countries have stock exchanges. If trading in stocks was unislamic, they would have banned it.
Regrads

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Hi Evolution!
Investment in stock markets and bank loan are very different.
Bank loans charge interest not on the expectations of profits but on a host of other factors such as length of time, collateral, current interest rate markets etc. This interest has to be paid irrespective of whether the borrower makes money or not. However, in stocks markets, company pays divdends(a share in the profits) when they are profitable themselves or expected to be profitable in futures. Dividends are not guaranteed like interest payments. If company is unsuccessful, then its shares prices go down and the investor shares in the losses indirectly.
As far I know all major islamic countries have stock exchanges. If trading in stocks was unislamic, they would have banned it.
Regrads

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There you have it. A simple, brief and well defined explanation.

Agreed with pervez,
but i would like to add something more, in stock market you have two kind of returns , one is dividend and other is capital gain (or may be loss),

If at the time of investment you are known about the return then it is interest, and if you r not known then it is profit,

You are right evolution about the one concept with two names, but one thing you should think about that, if you take loan of Rs.5000 today and the lender asks you to value the loan on the current rate of gold, say it comes to 1 tola, and you have to return it in value equivalent to 1 tola of gold after 1 year, and at the time of maturity you pay Rs. 5500, as the prices of gold rose, then what will you say this difference of Rs. 500, ?? is it profit or interest ??????
isnt it little bit confusing ???/

S M R

Edited by - smraza on Aug 15 2003 013609 AM

Assalamalaikum!
This is a very valid and nice question by Evolution and some nice answers have also been given. I would just like to add that as most of us are aware that there are 2 kinds of interest; namely, Compound and Simple. The interest declared in Islam is the compound type of interest. That is simply due to the fact that at the time of the Holy Prophet(P.B.U.H) and even in modern times, poor people take loans on an agreed interest rate and if for any reason they miss 1 repayment or so, the interest is compounded beyond their means. This leaves them with 2 option, 1. either burden their forthcoming generations or, 2. increase their earnings by whatever way, legal or illegal, leading to a probability of social evil.
Coming to the part about the difference in the wordings, well some people would say that but in reality there is a vast difference.
1. Interest rate is a predetermined rate, which makes the return on investment a known phenomenon for both the parties.
2. When they talk about giving profits, it means sharing the amount, which is unknown and there is not a definate probablity that a certain (predetermined) amount will be paid to the investor, upto the day it is announced.

I hope that this will clear any confusions.

Regards

OSA

OSA

I think that the matter is too sensitive to be discussed on this forum. I myseld gave it very serious thought once and found myself very helpless resultantly. Some people will say the it is "halal" if it fullfills certain conditions and some will say other wise. All I know is that dealing in interest is an act of war against God and the Messanger. <img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle>
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I think that the matter is too sensitive to be discussed on this forum. I myseld gave it very serious thought once and found myself very helpless resultantly. Some people will say the it is "halal" if it fullfills certain conditions and some will say other wise. All I know is that dealing in interest is an act of war against God and the Messanger. <img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle>
<img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle><img src=icon_smile_dissapprove.gif border=0 align=middle>
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As I mentioned earlier, different sects of our religion have beliefs varying on certain issues.

But the points mentioned by Omar Saleh and SMR are pretty much valid. I am in no position to answer the question raised by SMR. I hope someone can.

I consider this topic a 'sensitive one' as well... So I guess I'll have to refrain myself from posting my own opinion and beliefs or rather what I have heard/learnt, as once again 'the beliefs regarding riba vary'.

very much agreed with Sumaan in this respect. I think we need a very specialized opinion. Any thing less can cause problems. So if some body wants to make comment on the subject, he / she better ber very careful.

Agreed with sumaaan and Ophie,
but i dont know why people just talk about the interest ?? there are so many things which are also haram but usually do so many times during a day, e.g. Anger,

i m not of that opinion that if we do one haram thing then we get licence for doing all haram things,

so the question raised by Evolution was very much valid
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if mark-up and interest are the same, people would say that it is haram. Can our economy survive if this concept of mark-up is disallowed? Those of you who do think that we can survive, please elaborate as to how?
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we have to wait any molvi CA sb. who will become member of this forum so he will be able to clarify the question raised by the Evolution <img src=icon_smile.gif border=0 align=middle>

S M R

Evolution

sumaaan

Pervez

sumaaan

smraza

Omar Salah Ahmed

n/a1

sumaaan

n/a1

smraza