Islamic Banking!!!

[nura]

You do not understand, there is no daruri where interest is concerned. You cant place funds in a bank to get interest and say that it is daruri because there is no commercial bank or invest in Govt. bonds and be collecting interest and call that daruri. In fact you can't even open a savings account and collect interest because there is no Islamic Bank. Honestly if we are serious at avoiding riba in the conventional banks, i think we can do that in the following ways:

1. Credit Card - Riba   Vs   Smart Card/electronic purse/debit card - non riba
2. Savings account - Riba Vs Current Account

you also avoid collecting loans with interest, even mortgages, lease or hire purchase. Remember that Allah (SWT) and the Holy Prophet (SAW) are waging a war against the person that collects, witnesses, writes and gives interest, wa iyazu billah.

This include Bank workers. Some scholars are of the opinion that in places where Islamic Banks exist any business with a conventional bank is haram and this include transfer of funds. Ref. www.fatwa-online.com

There can't be interest in the cloth you wear unless the money you use to buy it is from the interest you earned or was lend to you with an interest. You cant be liable to intrest unless you work where you have to witness the loan, give or collect it so i think it doesnt matter if the firm you worked for collect interest. For bankers it is like this; it is very difficult for them to avoid any of the following: Writing, Taking, witnessing or giving; and by working in the bank they are assisting in the transgression of the Laws of Allah (SWT) as Allah says in the Holy Qur'an "Help you one another in al-Birr and at-Tqwa(virture, righteousness and piety); but do not help one another in sin and transgression, and fear Allah. Verily, Allah is severe in punishment" (Soorah al-maa'idah, aya 2) by working in the bank you'll help them make profit from interest and you'll market your brothers, friends for deposit and account opening etc. that's indulging in the 2nd part of this aya.

whatever is worth doing is worth doing well. if therefore Islam is worth practicing it has to be practiced very well to qualify for the rewards hereafter. And it is very simple to practice, just do what is required and leave what is banned of you.

Lets be good muslims.

[MAG]

AbuM you have said it all, but i will add a few words as well.

Interest and bank charges are 2 different issues. Islamic banks charge for money they manage and invest. While this does not usually affect short term savings and checking accounts, investment and long term savings accounts are charged. The bank usually survives because it does go into businesses as well (legit by islamic injunctions ofcourse) by lending money, buying property etc, but they dont lend money on the basis of capitalist rules, fixed interests etc, the risk is shared by all parties, if there is a profit there is an agreed formular in which it will be shared and vice versa. Long term savings are usually converted to gold, in this way inflation etc is taken care off, whenever you choose to cash in, you will get just your money's worth. Another advantage is things like zakat are automatically deducted from all money you have in the bank that qualifies as "zakatible".

Talking about interests paid and recieved by commercial banks, thats why we have things like Zakat, we are supposed to clean our wealth as much as we can, and the rest that we can't (dont know off) zakat takes care off, dont get me wrong i am not saying because we pay zakat interest in legit!! It is soley our responsibility to make sure our wealth is halal in all its forms, any interest we are paid should be removed from our money and the rest zakat is paid on. I know there is only this much we can do to make sure of that because of the world we live in today, but i dont think its an excuse, and i dont think Allah will give any concessions to us for being part of the system. It is incumbent on us to make sure the necessary infrastructure is there to handle our wealth etc.

On implementing islamic financial institutions in our society...
I think it will be very difficult to implement, considering the type/mode of governance we have, for such an institution to succeed it will have to be totally independent of the federal commerce and monetary agencies. Considering the fact that Naij is a mixed society it is very unlikely to achieve this autonomy, and i think this is one of the reasons why it still hasnt materialised.

[Anonymous]

Ummita this is one great topic.. Jazakallah 7 truelly what you and Habiba said is all true.

Allah openly declares war against those who devour usury and interest!!

Let me quote this:

'Oh you who believe, be afraid of Allah and give up what remains from riba (usury/interest) from now onwards, if you are really believers. And if you do not give up (usury/interest) then take notice of war from Allah and his messager
(chapter 2, Verses 278.279)

In one hadith narrated by Abu Hurairah RA he reports the Prophet SAW saying that "Interest has seventy grades and at least grade is equivalent to the sin of having an act of fornication with one's own mother".
(Mishkaat).

[Anonymous]

Inna lillahi wa inna iyahin rajiu'n. So this is all true. Jama'a lets all help to see that we all invest our savings in Halal banks. This is truelly mind shocking. Allah ta tabbatar mana da alheri.

[nura]

Oh yes Papi and insurance too. apart from cooperative insurance, i.e. Takaful which is almost similar to Dashi. All other Insurance are unislamic because of the fact that they represent fall back against act of God to mitigate loss in case of anything that might happen to a property or life. This is like daring God or saying do what you like I am covered.

[Ummulhuda]

AbuM
Talking of insurance, I can't help but think that it is not absolutely haram. Maybe Makruh?  My mind is not coherent at the moment so I can't even explain myself to myself let alone to some one else, but I've always had this doubt as to the status of some types of insurance vis a vis Islam.

[Borg]

Insurance in Islam is a heavily debated issue, that has left islamic scholars divided, here are both sides of the arguement. UmmulH I hope this make it a little clearer.

It is a Muslim's belief that everything that happens in this world is by the will of Allah. Similarly any accident or misfortune that befall us, that results in the loss of life or belongings, is by the will of Allah (swt). If that is the case, some people might ask, why should there be Takaful? Should we then not leave it to Allah and accept whatever accident, misfortune or catastrophe that befall us?

Whilst it is true that we should accept whatever "misfortune" that befall us, we are also taught to avoid or reduce the possibility of these "misfortunes" by taking positive steps. One day the Prophet (s.a.w.) saw a bedouin leaving a camel and he asked the bedouin, "why don't you tie down you camel?" The Bedouin answered, "I put my trust in Allah." The Prophet said, "Tie your camel first, then put your trust in Allah." What the Prophet (s.a.w.) has done here is teaching the bedouin to reduce the risk of losing his camel. Similarly in many actions of the Prophet (s.a.w.), we saw that he took steps to reduce risks although he could have done otherwise if he wanted to. For example, during the Hijrah, he went to hide in the cave first instead of going straight to Madinah. He commanded the companions to migrate to Madinah by batches instead of in one big group. Again this is to reduce risks. When he went to war, he put on his armour instead of wearing light clothes.

In this modern world, one of the ways that can be done to reduce the risk of loss due to accident or misfortune is through insurance. In fact it is almost impossible to live without being affected by insurance. The house that we buy or rent has got insurance cover. The car that we buy or rent has to have insurance. The bus that we board has insurance. Insurance is all around us whether we like it or not. However, what is the status of insurance in Islam?

Islamic Rule Concerning Insurance

Our scholars are not in agreement whether insurance is permissible (Halal) or prohibited (Haram). Since insurance as it is being practised now did not exist during the Prophet's time, Ijtihad is used to determine whether it is permissible or otherwise. As the scholars are not in agreement as to whether insurance is permissible or prohibited, they are also not in agreement as to reasons for its prohibition.

The scholars who opined that insurance is permissible said that insurance is a modern contract and there is no injunction (Nass) regarding it. If there is no injunction, then it is allowed (Mubah). They based their argument on the established legal maxim that "the original legal position on any matter is permissibility until there is evidence prohibiting it." This legal maxim is based on the Qur'an of which some of the related verses are as follows:-

"We have subjugated to you all that is in the heavens and the earth" [45:13]

According to the scholars this implies that, in principle, we are permitted to use the resources of the universe. This implies that all acts that are necessary to facilitate this usage, including transactions, are permissible. To reinforce this, the Qur'an lays down the principle that Allah (swt) has clearly explained His prohibitions. Allah swt says in the Qur'an:

"He has explained to you that which is forbidden to you, unless you are compelled thereto" [6:19]

Furthermore, the universe is described as an adornment of Allah. This is stated in the Qur'an [7:32]:

"Who has forbidden the adornment of Allah which He has brought forth for His bondsmen, and the good things of His providing?"

Therefore, a mere presumption is not enough to declare something unlawful. Muslim scholars have held that any injunction that overrules this principle of permissibility must be decisive in meaning and transmission (Nasson qati'ul thubut wad-dalalah).

The scholars further claimed that insurance is a contract that brings Maslahah to the insured. Without insurance, for example, one's next of kin will suffer a huge burden after his death. Also, the scholars said that custom ('uruf) establishes insurance to protect puband individual intereand custom is accepted as a source of Islamic law. According to them, the insurance contract is not a contract of exchange but falls under the concept of Tabarru' and as assistance and guarantee by the insurer to the insured, compensation. In this respect the insurer's position is that of a middleman that collects money from the insured and collectively arrange a form of assistance to them in facing collective losses. Other scholars claimed that the premium the insured pays to the insurer is a fee for looking after his (insured's) property.

On the other hand, many scholars deemed insurance to be prohibited (Haram). They could not unanimously agree on the reasons for its prohibition. However, in 1972, the Malaysian National Fatwa Council decreed that "insurance", especially life insurance, is a Fasid practice because it contains the elements of Gharar, Maisir and Riba, therefore, it is Haram.

Gharar

According to scholars, Gharar is defined as a contract where the results are not known or hidden, or one of two possibilities where the frequent occurrence is the one that is more feared. The insurance contract is a contract of exchange whereby the insured pays the price (premium) and the insurer provides compensation. In a contract of exchange, the Gharar element that can nullify the validity of the sale is consent. The Qur'an [4:29] says:

"O who you believe, do not eat property among you in a false way, except through trade by mutual consent."

However, knowing the subject matter in a contract is required in determining consent because it is not logical to say that one gives consent to something that he does not know. The scholars further said that in the insurance contract there are four types of Gharar present. These are:

Uncertainty in the Outcome

When the contract is made, neither the insurer nor the insured knows the outcome of the contract. The insured does not clearly know whether he will get compensation or not as an exchange to the premium that he has paid. Similarly, the insurer does not know the outcome.

Uncertainty in the Existence

In the insurance contract the insured does not know the existence of the compensation since it depends on the outcome that may or may not happen.

Uncertainty in the Results of the Exchange

When the contract is made, neither the insurer nor the insured knows the outcome of the exchange. The insured does not know whether he or she will get the compensation as exchange to the premium that he pays. Similarly, the insurer does not know how much premium it gets. Sometimes he will receive the premium only once or a few times, but has to indemnify an amount that does not commensurate with the premium.

Uncertainty in Contract Period

According to the principle of the Islamic Mu'amalah, when a contract is deferred, the period must be made known. If not, the contract is considered void. The same situation arises in the insurance contract whereby compensation is based on a time frame that is not known and cannot be known, especially in life insurance.

Maisir

Maisir is akin to gambling. The insurance contract is equated with gambling where if the peril happened, the insurer will lose. On the other hand, if the peril does not occur, the insured will lose. Furthermore, some scholars argued that the source of the money that is being paid as compensation is not determined.

Riba

There are many verses that prohibit Riba. What exactly constitute Riba has always been a disagreement among scholars. However, it is generally agreed that interest whether on principal or late payment is Riba. Other forms of Riba established by the Sunnah of the Prophet (s.a.w.) is the exchange of Ribawi elements where there is a difference in time and/or quantity. The Ribawi elements mentioned by the Prophet (s.a.w.) are gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates, and salt for salt. By making an analogy, money is similar to gold and silver where it is a medium of exchange. Therefore, it is a Ribawi element and in the contract of exchange between the insurer and the insured there is difference both in quantity and amount. Furthermore, the scholars argued that insurance companies give out loans and charge interest and this is Riba.

Now that it is generally agreed that insurance is Haram, what can be done about it? Is there such a thing as insurance that conforms to Shari'ah?

Our scholars gave some thoughts and suggest that the principle of Takaful can be a basis of "Islamic" insurance. Takaful comes from the word Kafala meaning guarantee. So Takaful means mutual guarantee. Under this principle, the participants to the scheme would give their money to the company on the basis of Tabarru' with the stipulation that the company would compensate them with an amount should he be struck by an calamity. They further stipulated that the company must not be involved in Haram activities like Riba, gambling, liquor and the like.

Interested in Islamic Banking and Insurance go to  http://www.islamic-banking.com/

[Ummulhuda]

That was very very educative Borg! Thanks a million! We've got some really learned ppl on this forum. Keep up the good work!!!!

[nura]

Oh Borg i cant thank you enough.

[Borg]

U're most welcome, as they say, ask and you shall be told, just like you asked i did too and now am sharing it with you all.

[ummita]

Salam,
This is all great. Mashaallah, jazakallah. All of you have INDEED increased & widened ma knowledge on Islamic Banking..taught I knew all...but after reading all I realised I knew half enuff.

AYI HAKURI I WANT TO DIVERSE THIS A LITTLE BIT.
Another problem is that, MORTGAGES is also haram. Be it house, car or any valuable thing or property that can be mortgaged is absolutely haram.

But alot of Islamic organisations eg: Housing & estate agents have started what they call HALAL MORTGAGES.

For further readins...one can check this site out. www.1stethical.com

Ma'asalam

[Anonymous]

InnaLillah soooooooo Mortgages is also HARAM? Ya Allah.

[Anonymous]

Salam,
This is all great. Mashaallah, jazakallah. All of you have INDEED increased & widened ma knowledge on Islamic Banking..taught I knew all...but after reading all I realised I knew half enuff.

AYI HAKURI I WANT TO DIVERSE THIS A LITTLE BIT.
Another problem is that, MORTGAGES is also haram. Be it house, car or any valuable thing or property that can be mortgaged is absolutely haram.

But alot of Islamic organisations eg: Housing & estate agents have started what they call HALAL MORTGAGES.

For further readins...one can check this site out. www.1stethical.com

Ma'asalam

I never knew mortgages were haram. I surely know for a fact that Interest are haram. I will check out that site & find out more. Thank for passing out such important detail

[Anonymous]

To tell you the truth I am a CHRISTIAN but my fiancee who happens to be a hausa man is a MUSLIM. I know he once told me that he was trasferring his accounts from HSBC to some kuwait bank I asked him why he said it had something to do with Interest. Now I knw why it is agaisnt your religion. I will push him to proceed because he is the layed back type. Now the problem is He has a couple of houses that he has been mortgaging on now 2 of the houses: he has completed the mortgage process, now the property belongs to him. I was a little bit confused because of this does he become a sinner? because I know Islam takes its ppl practising it dead serious. IF he didnt knew mortgages are haram what is the result?

[Hafsy_Lady]

IF he didnt knew mortgages are haram what is the result?

Millie, the lord doesnt forsake us for things we not know of. If  you fiancee never knew motgages are halak(which basically means forbidden in ISLAM) You should not worry because we are not going to be punished for things we didnt know, even if we do Forgives. So not to worry