Talk:Islamic banking

From Wikipedia, the free encyclopedia

	This article is part of the WikiProject Islam, an attempt to build a comprehensive guide to Islam on Wikipedia. If you would like to participate, you can edit this article, or visit the project page, where you can join the project and/or contribute to the discussion. If you are new to editing Wikipedia visit the welcome page so as to become familiar with the guidelines.
???	This article has not yet received a rating on the quality scale.
???	This article has not yet received a rating on the importance scale.
Article Grading: The article has not been rated for quality and/or importance yet. Please rate the article and then leave comments here to explain the ratings and/or to identify the strengths and weaknesses of the article.

WikiProject Echo has identified Islamic banking as a foreign language featured article. You may be able to improve this article with information from the Japanese language Wikipedia.

Compliments to User:Silver_Maple for excellent work. This article should be very clearly about the mechanics of banking, and should parallel the main article on banking as much as possible (that is, it should be more a way to figure out HOW Islamic banking works than WHY, which is what Islamic economics seems to be for). Also see Talk:hadith for another issue: could we see first class links to all the major hadith collections (six in all?) so readers can assess how they differ in their character, and (ideally) whether a specific cited hadith is considered authentic by all collections, just five, four, three, two, or just one? EofT

Is riba better translated as Usury and not just the charging of interest alone?

Contents 1 Gharar 2 Opposition 3 Zeno's edits 4 Bible Gambling? 5 Copyright issue

[edit] Gharar

Should this article (or Islamic economics) also consider and explain gharar (usually translated as "uncertainty" - I see it doesn't have an article) which I understand is also an issue with, for example, derivative financial instruments such as options and futures. -- ALoan (Talk) 14:49, 11 Apr 2005 (UTC)

[edit] Opposition

Many Muslims and non Muslims alike have opposed these Islamic banks, claiming that they do deal in interest but merely conceal it through legal tricks. Without any citation it is equvalent to imposing the views of the writer, it can not be claimed that majority of the Muslims oppose this new horizon of Islamic Banking. Thsi new field is being developed and several reknown Muslim scholors have already acknowledged the Islamic Banking ventures, therefore it is too soon to state that this cincept has a mssive opposition. for referencePrinciples of Shariah Governing Islamic Investment Funds by Justice(R) Mufti Muhammad Taqi Usmani Mufti Muhammad Taqi Usmani--58.65.129.253 19:47, 16 March 2007 (UTC)

[edit] Zeno's edits

I changed Zeno's editions here in order to not make the intro incredibly imbalanced so that it discusses opposition in depth before it really addresses the subject at hand. I asked that he hadd a quick blurb in the intro about the points but put the bulk into the body, he reverted once without any comment and the second time in a terse manner. I would like the opinions of others on this issue. It is just really bad style and mangles this article. gren グレン 08:42, 13 November 2005 (UTC)

"...in order to not make the intro incredibly imbalanced " The intro is not "incredibly imbalanced." There are two themes in this article: (1) what are the types of transactions used in "Islamic banking," (2) how are these transactions related to contractum trinius (i.e. how are all of these transactions a form of interest in disguise, from an economics and finance perspective). This is why contractus trinius is mentioned BEFORE the list of transactions. -- Zeno of Elea 08:46, 13 November 2005 (UTC)

The introduction is to introduce the subject, you list the complaints before you Islamic banking practices are properly explained. I would be fine if you added something about opposition right after the principles section and then added the blurb I talked to. The intro is imbalanced in terms of size... as it reads now you are making a thesis... Islamic banking practices stil pay interest more or less... which, I don't disagree with as I have said on your talk page, it seems that way to me with my limited knowledge, yet the way you are writing it is shoving this all at the top where it does not belong. "The introduction describes the scope of the document. It gives the brief explanation or you can say a summary of the document. The readers can have an idea about the following text before they actually start reading it." You are making that all the intro, which it is not, the intro should reflect content. I have no problem explaining the basis of concepts for banking in a section above principles. However, if this is going to go nowhere I have asked the opinion of others and we should bring others in... because, it's a style matter... and I don't think either of us are known for our great writing. gren グレン 10:10, 13 November 2005 (UTC)

Zeno, there's no need to go into detail re your opposition to Islamic banking in the introduction. Gren is right. It makes the article top-heavy. It is just not good style. The usual Wikipedia organization is brief intro, then table of contents, then exposition, then pro and con, or however many positions there are. You seem to want to give the con section unusual prominence.

If you want your arguments notiZeno, there's no need to go into detail re your opposition to Islamic banking in the introduction.ced, at the end is the right place. Debaters want the last place and the last word. You're being favored, so it's counterproductive to complain. Zora 10:15, 13 November 2005 (UTC)

"Zeno, there's no need to go into detail re your opposition to Islamic banking in the introduction."" Firstly, Zora, this is not regarding my opposition to Islamic banking. This has nothing to do with me specifically. I take offense to your deragotary style of writing, and suggest that you act in a more civil manner. As the text and the source clearly indicate, there are two issues here: (a) what is "Islamic banking" really, and (b) since it really is interest some Muslims oppose it on those grounds. The fact that Islamic banking is interest banking permeates this article. That is why the mention of contractum trinius and the underlying interest banking nature of "Islamic banking" is mentioned in the introduction, and is then elaborated upon transaction by transaction. This article is not a debate. There are two parallel views here: (a) what Islamic banks describe themselves and their transactions as (including their Arabic terminology for each transaction) and (b) what these transactions represent in terms of time value of money (i.e. interest). -- Zeno of Elea 10:24, 13 November 2005 (UTC)

First of all, Islamic Baknking is by no means even close to interest. By means of intrest, many countries are in black hole debts that they have no posibility of escaping. That can not happen witht the implemetation of Islamic Banking, a debt can not run overboard, it can not mutliply to 3 times the original value, without the loaner being able to aford it, bringing her/him/the country into bakrupsy. That is the reason international bankers want to lobby Islamic banking as something bad, so they can get ridd of it and install private banks in disguise, like the Federal Reserve (That is neither federal, nor have reseseves), to suck the country dry. And that is why Zono is here, and that is why he wants the critique in the upper part. Someday, ill add what i wrote to the article, of course well sourced, and of course with Zora reverting me for some nonsense argument.

I strongly oppose of having the critique before the subject is addresed, that goes against WP standards. Also, Zeno, when you have beefed up the cirtique, ill be there to counter argue it.

(discourse on the Federal reserve removed 82.35.248.126 02:50, 21 August 2006 (UTC))

Have a nice day! --Striver 09:35, 17 November 2005 (UTC)

• "First of all, Islamic Baknking is by no means even close to interest." "Islamic banking" is no different than contractum trinius. Let us say that I want to borrow money to buy a car. The car costs $30,000 which I can repay in 4 years. The car dealership offers to lend me the money for an effective annual fixed interest rate of 7% for 4 years. This means that. after interest, the car will cost me about $40,000. My Muslim friend tells me that Islamic Banks do not charge interest - I am happy because even though I am not a Muslim, I do not want to pay $10,000 in interest for the car loan. If the Islamic bank can give me a zero interest loan then that will be the best thing to ever happen. So I go to the Islamic bank. They do not offer to give me a zero interest loan. Instead, they offer to "buy" the car at $30,000 from the dealership and "sell" the car to me for $40,000, and I can pay the $40,000 back over 5 years. But in the end, the car loan cost me the same whether I went through the normal method or through the "Islamic Bank." This is because the "Islamic Bank" is really charging an effective annual fixed interest rate of 7% for 4 years on a $30,000 loan. The "Islamic Banks" and Islamists insist that this is not interest banking and they are entitled to their opinion, but the opinions of others must also be heard.

Up to this point, the argument looks strong and the two transactions look identical. However, the differences are visible only if you go further on examining the transaction as a whole. If nothing goes wrong, then you are correct that the two transactions are identical. The major difference is when things do not go as planned as in the case if a default on payment happens on the part of the borrower/buyer. In the first case, the loaner is entitled all the principal of the loan plus all applicable interest and any additional monetary compensation for the default on the loan. If the value of the car, the original object that the loan was supposed to finance, at the time of default is not enough then the lender has a legal claim on the borrower's other assets until the financial obligations of the borrower are fullfilled. In the second case, the car is the only asset on which the seller has any claim. Additional compensation beyond the original agreed upon price is not permitted and is considered usurious. To protect the seller, any permissible method can be used in the contract in case of a default on payment, including for example the confiscation of the object sold - the car in this case - or the legal requirement that all remaining payments be due at the present time and hence become a debt. In case of Islamic home financing, some contracts are a co-ownership between the financing entity and the owner of the house. In case of a default, the house is sold and the financial entity regains its share of the house from the sale price. This share can be more or less than the remainder of the "loan", but it reflects the financing companies willing to participate in the risk. Such participation in tranditional banking loans is non-existent. I think to a fair mind, looking at it this way, one cannot say that the two transactions are exactly the same. "Ahmedayad 02:05, 27 February 2006 (UTC)"

I don't see any difference between your Islamic home financing and regular western home financing. If you (persiently) default on your mortgage payments, the house is repossessed and sold by the bank; from the proceeds of the sale, the bank takes what is rightfully theirs (i.e. the outstanding amount on the loan) and the rest you can keep. -DrPizza 23:37, 17 August 2006 (UTC)

• "By means of intrest, many countries are in black hole debts that they have no posibility of escaping. That can not happen witht the implemetation of Islamic Banking, a debt can not run overboard, it can not mutliply to 3 times the original value, without the loaner being able to aford it, bringing her/him/the country into bakrupsy. " Let us take a real example of a government borrowing money. In order to borrow money, the government must issue a bond. For example, the government might issue a 5-year zero coupon bond with a $100 par value for $90. This implies an annual interest rate of about 2%. This just means that you lent the government $90 today and will recieve $100 5 years from today. There is no chance that the loan will grow to 3 times its size. If the government defaults, i.e. if the government fails to pay be back $100 in 5 years from today, then that does not imply that you will now recieve $300 in 15 years from today instead. On the contrary, if the government defaults, then you probably will never see your $90 investment again, and certainly not the $100 that was promised to you. The most you can hope for is to recover some money, after the default, at a "recovery rate" (e.g. you might eventually get $50 from the government on the $90 that you had lent). Governments do sometimes default on loans. This doesn't mean that the government is "bankcrupt" in the sense that individuals and companies can go bankcrupt, rather it means that the government's currency is now in crisis. For example, there was the famous Russian Default of 1998 which led to the fall of Long Term Capital Management (LTCM) and caused the Federal Reserve to (controversially) save LTCM in order to prevent a financial meltdown on Wall Street. In the summer of 1998, the government of Russia defaulted on $40 billion in foreign debt that it owed, due to a currency crisis in the ruble foreign exchange rate. In this case both the lenders of the $40 billion (international financial institutions) and the borrowers of the $40 billion (Russia) suffered from this default. It is the same as if you lent $90 to the Russian government for 5 years and then 5 years later all you got back was $5 instead of the $100 that was promised to you. Now you can't afford food and shelter because you are a retiree who was depending on that $100 fixed income. It is not that the Russian government's debt to you has now grown to 3 times its size, it is that the Russian government has given you just $5 and told you to get lost. But the Russian government has also suffered because people have lost trust in its currency, the ruble's foreign exchange rate has plumeted, and now investors are demanding a much higher rate of return (interest rate) on Russian bonds because investors demand to be compensated with returns for the risks that they take. Of course there is no such thing as government borrowing from Islamic banks because explicit interest banking is needed in order for governments to be able to raise money in the debt capital markets.
• "That is the reason international bankers want to lobby Islamic banking as something bad, so they can get ridd of it and install private banks in disguise, like the Federal Reserve (That is neither federal, nor have reseseves), to suck the country dry." International bankers are not trying to "lobby Islamic banking as something bad." So-called "Islamic banking" has nothing to do with governemnts or countries borrowing money and "Islamic banks" do not compete with international banks - Islamic banks cater to a market that other banks do not. Islamic banks deal in interest under the guise of two "seperate" transactions in order to circumvent Islamic prohibitions on interest, just as European merchents did in the Middle Ages with contractum trinius. If you borrow money from an Islamic bank to buy a house then you will be paying interest on the loan, and if you fail to pay back the money to the Islamic bank then the Islamic bank will take control of your house (actually, the house remains under the name of the Islamic bank until you pay back the loan, so that the Islamic bank is in full control and can kick you off the property if you fail to pay back the loan). Islamic banks cannot cater to the financial needs of governments and corporations - they only cater to the needs of Muslim individuals and small businesses that wish to go into a partnership. And finally, there is no conspiracy of international bankers to install "private banks in disguise" in order to "suck the country dry." You cannot expect your paranoid conspiracy theories to be taken seriously here.

Regarding the contactum trinius point that you keep referring to, I think the analogy is false. The fact that you can make two separate legal contracts in one sitting so that the result is a usurious transaction was known as early as the time of the prophet. I believe it is called "bay' al-'Inah". The most prominent example of which is to buy a watch - for example - from someone for $120 to be paid over a year period in $10 monthly installments, then simultaneously selling it to her for $100 in cash. The result of which is a 20% interest loan on the $100. This is "haram" according to everybody I know since it is nothing more than trickery. You might be right that some "Islamic Banks" have employed - and some may still are - contracts that is in this fashion. This, however, is an argument against these institutions and not against the concept itself. I should add that many of the institutions that dealt in these transactions have since changed them. "Ahmedayad 02:22, 27 February 2006 (UTC)"

• "And to inform those who care: The Federal reserve of USA is a corrupt private bank that is taking intrest for money they print from thin air." This article has nothing to do with the Federal Reserve. Why don't you at least take your paranoid conspiracy theories to the proper article?

-- Zeno of Elea 20:55, 19 November 2005 (UTC)

[edit] Bible Gambling?

I am unaware of any verse in the Bible that condemns gambling specifically. Either it should be cited or removed from the article completely. --Jayson Virissimo 09:50, 13 May 2006 (UTC)

Since there is no opposition so far I will remove the specific entry. If there is anything I am missing just let me know --Jayson Virissimo 01:47, 15 May 2006 (UTC)

I have opposition to your removal. The "biblical" banning of gambling or rather games of chance is derived from the recrimination of the Roman soldiers who played dice for Jesus' clothing and personal items as he lay dying on the cross. It would be akin to a Hadith in Islam, not in the Koran, but universally condemned (atleast until recently/modern times were all manner of things are lax) by the established churches (this was universal throughout denominations in older times). So please leave that portion in with my addendum. Also do keep in mind that interest was seriously frowned upon and restricted in early Christianity as well (derived obviously from Jesus and the money lenders) and was almost always seen (while it was by no means restricted to) as a Jewish activity/practice in old Europe/early Western Christianity. Thanks - Karl Lrk

The Christian prohibition on interest did not come from Jesus cleansing the Temple of the money changers (who were not necessarily money-lenders, by the way), but from the Old Testament prohibitions (Deuteronomy 23:19-20, Exodus 22:25-27 and Leviticus 25:35-37, Psalm 15, etc.) Christians merely interpreted themselves as replacing the Jews. This view changed with the Reformation and the rejection of what you describe as a "Christian Hadith". There is nothing in the New Testament prohibiting interest -- indeed, you can easily interpret the Parable of the Talents are permitting it. Epstein's Mother 06:38, 20 January 2007 (UTC)

[edit] Copyright issue

"The first modern experiment with Islamic banking was undertaken in Egypt under cover, without projecting an Islamic image, for fear of being seen as a manifestation of Islamic fundamentalism which was anathema to the political regime." -- This sentence is taken *directly* from http://www.usc.edu/dept/MSA/economics/islamic_banking.html 130.126.247.88 03:43, 31 July 2006 (UTC)