RIBA - INTEREST - USURY

anta

Originally posted by FaithHealer3 at 31-7-2006 01:51 AM


well then answer my question: what relevant does my religion have on the subjuct we are debating on?

Instead of asking irrelevant question, you should concentrate on islamic banking calcul ...

FH3,

Are you afraid and scared to answers those simple questions!

In fact, I can refute your misconceptions and accusations straight away. However, as I wrote earlier,

While waiting for your answer to the above, for a start

Bismi Allahi alrrahmani alrraheemi
بِسْمِ اللّهِ الرَّحْمـَنِ الرَّحِيمِ

Narrated Abu Hurairah:
The Prophet Muhammad(pbuh) said, "Religion is very easy and whoever overburdens
himself in his religion will not be able to continue in that way. So you should not
be extremists, but try to be near to perfection and receive the good tidings that
you will be rewarded; and gain strength by offering the Salat(prayers) in the
mornings, afternoons and during the last hours of the nights." (See Fath Ab-Bari, Vol
1, Page 102) (Sahih Al-Bukhari, Vol. 1, Hadith No.38)

Islam is my way of life.

http://www.geocities.com/mewatch99/

LostSoul

it is interest-free. the bank only takes the profit sharing... just like anta explained. they buy, they sell at higher value... that's all. in islam, conventional loan is haram due to the fact you loan the money with the interest. so, the solution is, the bank bought the house, mark-it up and sell it. and it's transparent, in a way that when you buy the house, you know how much bank mark it up. so, it fits all the requirements of islamic banking... how can you expect bank, an FI not making any money on any transaction??

redchasiew, slightly or much, it all depends on personal perception. i would say, if the loan tenure is 30 years, the diff of even 1% will contribute to big differences, don't you think so?

antiQue

hmm.. I guess the misunderstanding happen because FH goes to conventional bank to see its "islamic banking"...

FaithHealer3

Originally posted by anta at 31-7-2006 09:05 AM


FH3,

Are you afraid and scared to answers those simple questions!

In fact, I can refute your misconceptions and accusations straight away. However, as I wrote earlier,

While waiting f ...

Whats the matter with you? Can't you ask relevant questions?

It is your faith that prohibits RIBA but you people are are still taking riba can call it profit.

And you can't refute the calculation of islamic banking that relies on current interest rate. You did the cut&paste of islamic banking calcution that clearly shows that interest in used in it You can't refute that..  No way Hosay.

FaithHealer3

Originally posted by LostSoul at 31-7-2006 09:53 AM
it is interest-free. the bank only takes the profit sharing... just like anta explained.
they buy, they sell at higher value... that's all.

its riba when they sell at higher price. That what riba is all about. easy money.

and that easy money is caluculated based appoximately on current fixed interest rate.  

Originally posted by LostSoul at 31-7-2006 09:53 AM
in islam, conventional loan is haram due to the fact you loan the money with the interest. so, the solution is, the bank bought the house, mark-it up and sell it. and it's transparent, in a way that when you buy the house, you know how much bank mark it up. so, it fits all the requirements of islamic banking...

You must realise that the "mark-it up" amount is calculated base on fixed-rate interest. which is RIBA.

Conventional banking also provide fixed interest rate load in addition to the usual floating interest rate loan especially in overseas.

Originally posted by LostSoul at 31-7-2006 09:53 AM
  how can you expect bank, an FI not making any money on any transaction?? .

Thats why islamic banking is not islamic. Remember Muhammad forbit riba.

in my opinion only "Qardul Hassan" is islamic banking.

anta

Originally posted by FaithHealer3 at 31-7-2006 11:23 AM

Whats the matter with you? Can't you ask relevant questions?

It is your faith that prohibits RIBA but you people are are still taking riba can call it profit.

And you can't refute the calc ...

FH3,

The questions should be answered by you not me. So the matter is with you. It is you.
Are you afraid and scared to answers those simple questions!

Since from the beginning of my post, I want to educate you and RedChaSiew a little bit. As a muslim, InsyaAllah, I will challenge your thinking ability. You don't have to worry on the relevancy to the topic(thread)  that you had started. It will be related to the topic.

FH3,

In fact, I can refute your misconceptions and accusations straight away. However, as I wrote earlier,

While waiting for your answer to the above questions, once again  for a start

Bismi Allahi alrrahmani alrraheemi
بِسْمِ اللّهِ الرَّحْمـَنِ الرَّحِيمِ

Narrated Abu Hurairah:
The Prophet Muhammad(pbuh) said, "Religion is very easy and whoever overburdens
himself in his religion will not be able to continue in that way. So you should not
be extremists, but try to be near to perfection and receive the good tidings that
you will be rewarded; and gain strength by offering the Salat(prayers) in the
mornings, afternoons and during the last hours of the nights." (See Fath Ab-Bari, Vol
1, Page 102) (Sahih Al-Bukhari, Vol. 1, Hadith No.38)

Islam is my way of life.

http://www.geocities.com/mewatch99/

LostSoul

faithealer, when it comes to financial terms, that's where u got it wrong. riba' is interest which is changing, unpredictable, like BLR. when islamic bank mark it up, it called profit sharing because again, it's fixed every year, regardless how BLR reacted. i don't see it as riba', i see it as FI makes a profit based on their sale, that's all.

when it comes to conventional, it's always based on BLR. BLR has yo-yo effects, and nobody can determine its up and down, so it's considered unknown factor in lending or borrowing money. in Islam, everything must be transparent. so that's why the profit rate is fixed.

surely islamic banking is not for everyone, faithealer. if you do not have faith in it, don't take it, regardless of how many non-muslims are taking advantage of it. and it will definitely grows... better you go to FIs which offer loans like SCB - Mortgage One, HSBC - SmartHome ok!

FaithHealer3

Originally posted by LostSoul at 31-7-2006 12:28 PM
faithealer, when it comes to financial terms, that's where u got it wrong. riba' is interest which is changing, unpredictable, like BLR.

You are wrong.

Riba is easy money gain from charging interest on the principal amount. The interest can be variable or fixed.

Originally posted by LostSoul at 31-7-2006 12:28 PM
when it comes to conventional, it's always based on BLR. BLR has yo-yo effects, and nobody can determine its up and down, so it's considered unknown factor in lending or borrowing money. in Islam, everything must be transparent. so that's why the profit rate is fixed.  

Wrong. Conventional banking does not always based on BLR. Obviously you never heard of Fixed Interest Rate from conventional banking.

difference between conventional banking (riba) and islamic banking is not the returns. there will always be returns when you do business. only stupids do business to incur losses.

the difference is in the motive. conventional banking motive is to earn profit through interest whatever the outcome may be. islamic banking motive is to spread and ascertain the risk between both buyer and seller. thus buyer and seller has more say on the transactions rather than conv bk. that explain its popularity in europe. it has nothing to do with being a muslim only instrument. however, muslims govt and also intl bankers has added halal features to attract muslims from mid east to carry on banking with the top 5 - ctbank, hsbc, abn, scb and boa.

islamic ins provide returns even for your car insurance. eg if a group of us pay the premium but no accidents or lesser than expected accidents happened. the surplus fund less administrative cost will be refunded. this is not practice in conventional insurance as the motive is different. conv ins will keep the surplus as profit - reason why it has a gambling angle to it..

FaithHealer3

Originally posted by bob at 1-8-2006 01:40 AM
difference between conventional banking (riba) and islamic banking is not the returns. there will always be returns when you do business. only stupids do business to incur losses.  

Conventional banking and usual Islamic banking is based on riba to get their returns/profits.

Islamic banking do not want incur losses so the impose riba on the principal. Islamic banking will die a natural dead without riba.

Anyway, bob do you take loan or save money in conventional bank? You know, openly declared riba base banks.

RedChaSiew

i know one moslem company called MAS which is not intrested in profit.

nightlord

You guys are so funny.:

As Shakespeare said :

"What's in a name? That which we call a rose by any other word would smell as sweet" - Romeo & Juliet

If you dont have a banker friend, then go get one esp. in the house mortgage department.

Islamic banking is more profitable for a bank because the bank has various ways to ensure profits
- fixed interest rate on a longer term with penalty on default of minimum required years
- fixed interest rate but compounded daily rather than monthly than tell consumers they can reduce it faster anytime
- fixed interest rate based on low interest first two years than normal interest after that but with penalty if default on minimum years.

For u muslims, try finding out what compound interest, future value vs current value, and the repayment of principle method used by banks before talking about HOW GREAT ISLAMIC BANKING IS.

YOU GUYS ARE BEING TAKEN FOR A BIG ROLLER COASTER RIDE with the bank laughing all the way to THEIR BANK.

ISLAMIC BANKING ON THE RISE yeah........ great marketing for the banks..........but loads of muslims PAYING MORE THAN CONVENTIONAL banking loan systems.

Anyway nothing to me, i am just a kafir who knows nothing.......but paying less SINFUL interest.:hatdown:

LostSoul

ok faithhealer, if you are so right, do tell me which bank offer conventional loan with fixed interest rate through the tenure? not for 3 years, 5 years, bla bla bla, but 30 years?

and again, you are wrong.. if riba is like what you said, charging interest on principal, since islamic banking does not charge interest, they merely buy the house and sell it back higher at certain percentage.. so, literally, u got it wrong... :bgrin:

redchasiew, MAS is not a muslim co. and only company that is NPO (non-profit organization) does not have any interest to make profit, whereas all co. regardless of muslim or not, when you do business , of coz u expect profit!

anta

Thank you Lostsoul and Bob.

While waiting for the answers from FH3 about the SIMPLE 4 QUESTIONS ( which I doubt he/she will NOT be able or dare to answer them!!), lets bring a few info..

Anta question Q1.
1.        What is your religion?

FH3 answer:
what relevant does my religion have on the subject we are debating on?

Anta Question Q2:
2.        Can you confirm the following statements that
a)        You(FH3) are not a muslim and you require details explanations about USURY/RIBA/INTEREST?
b)        You(FH3) are equating Islamic bankings with Conventional bankings? and all banks are similar!
c)        You(FH3) really hate Islam and muslims?

FH3 answer:
2a) yeap. i want to know why riba is still used in islamic banking.
2b) my view is that islamic banking runs on interest but the banks are cheating the public with thier gimmick that their banking is interest-free.
2c) I hate any dogma that discriminate those who don't follow thier version of religion and I hate those who discriminate others based on religion.

Finance (Oct--Nov, 2001)
http://www1.sim.edu.sg/sim/pub/m ... ms=entrepreneur#top

Islamic Banking: Interest-free, but Certainly not Profit-free
Ramin Cooper Maysami

Islamic banking, characterised by interest-free loans and deposits, has become an increasingly popular area of innovation in international financial markets. This article provides a brief background to the reasons for prohibition of a predetermined rate of interest and introduces the reader to the Islamic alternative to the interest mechanism--the profit and loss sharing system.

MENTION interest-free banking and you send a big chill down the spine of every "traditional" western-trained banker. Interest, after all, is the lifeline of a commercial bank--it is the mechanism for efficient channeling of funds, the incentive for attracting deposits, the source of earnings from loans, and the motivation for investing in business opportunities.

Changes in interest rate create a response in the whole economy: in determining consumer spending. Households, for example, respond to changes in mortgage, deposit, and credit card interest rates. Banks, in turn, adjust their lending rate in reaction to variation in the rates initiated by the central bank. Investors carefully analyse the yield of a proposed project before committing their funds. Capital budgeting of firms is sensitive to the required rate of return as well as the market interest rates. In short, interest rate is the most important transmission mechanism when it comes to allocation of funds. How then could we imagine a modern economy with interest rates removed? It just does not make sense.

The fact is that interest-free or Islamic banking is alive and indeed it seems like such activities are actually on the rise. Two countries in Asia, Iran and Pakistan, as well as Sudan in North Africa have revamped their entire financial system to comply with the Islamic principles of non-payment of interest on loans and deposits.

Other countries, Indonesia and Malaysia for example, have both traditional and interest-free banks operating side by side. Bank Islam in Malaysia and Bank Muamelat Indonesia are vigorous financial institutions attracting quite a healthy business.

Moreover, in both countries, Malaysia especially, traditional financial institutions have begun to set up Islamic banking units. While these units may initially aim to cater to the needs of Muslim clients, individuals and businesses alike, they ultimately will battle for attracting deposits and offering competitive loans regardless of the philosophical and religious convictions of the clients. All in all, there are about 45 countries with some form of Islamic banking or financial institutions.

Singapore banks, although starting late, seem intent to follow suit. Over- sea-Chinese Banking Corporation (OCBC), for example, offers interest-free current and savings accounts. As stated on the OCBC Web site (www.ocbc.com.sg), "we have created a way of banking that is in accordance with Islamic law. What this means is that no Riba or interest is paid to you. Instead, you are given a dividend. And all the Islamic deposits are invested in halal instruments approved by the Islamic Banking and Finance Advisory Board."

The text continues: ". . . an Al-Wadiah (custody in Arabic) Savings or Current Account gives you as much convenience as any other account: monthly statements of accounts, an Islamic Card for use at any of our ATMs and cheque book (for Current Account holders) for easy payments of bills. You'll also enjoy all the services of our 24-hour banking conveniences--ATMs, PhoneBanking and Internet Banking services." The Development Bank of Singapore (DBS), meanwhile, markets several Islamic Unit Trusts aimed at, but not limited to, the Muslim clientele.

Definition of Islamic Banking

What is Islamic banking and why is payment of interest forbidden in Islam? A general definition of what constitutes Islamic banking is not a universally-held or widely-agreed proposition. Some experts regard an Islamic bank as a monetary institution acting solely as an attorney to the depositors. Within this definition, the bank should act only as an intermediary, relying on its network of information-gathering branches to select reliable investment partners. Subsequently, it would facilitate the channeling of depositors' funds towards profitable ventures through various types of interest-free contracts, and end its intermediation as soon as possible, after the expiration of the contract.

Contd...

[ Last edited by  anta at 2-8-2006 11:16 PM ]

anta

Other Islamic thinkers regard an Islamic bank as a financial institution that directly employs an investor's funds in various investment channels that exist either in the real product markets or in the capital markets under one or more of the Islamic modes of contract. Thus, the said bank can enter into joint partnership agreements with the client to finance joint-ventures and to establish factories or workshops (direct investment). Alternatively, it may act as a mutual fund or unit trust, to buy shares and securities in on-going or newly established companies.

Yet some other scholars consider both functions as legitimate areas of operation for Islamic banks. Islamic banks, from this perspective, are thus multi-functional banks, offering all the services rendered by commercial, merchant, investment and development banks, but on interest-free basis, the constraints laid down by the Islamic Law--Shari'ah.

Prohibition of Interest

Payment of predetermined interest is clearly forbidden in Islam and Muslim scholars have provided various reasons for this. On a theoretical basis, most major contemporary western theories attempting to explain this phenomenon have been examined and refuted, including Bohem-bowarks' Time-Preference and Abstinence theories, Samuelson's treatment of interest as "rent for the use of money," Patinkins's handling of interest as "a form of income from property," Bain's views of interest as "payment for services of invested money," and Keynes' Liquidity Preference Theory.

Philosophically, interest is prohibited due to the perceived exploitation of one class of people by another.

In the case of consumption loans which are generally made to people who neither have the luxury of savings to meet urgent personal needs nor have access to any other means of acquiring financing, the prohibition of interest is mainly for humane purposes. In the case of loans for productive purposes, it is not deemed fitting for lenders of capital funds to be assured of receiving a rate of return while users of such funds--the entrepreneurs--have no assurance of direction and magnitude of returns. It is socially unjust to guarantee a predetermined return for any one party when the existence of entrepreneurial profit is uncertain.

Interest is also viewed as a transfer wealth from the poor to the rich, thus increasing the inequality in distribution of wealth, which is contrary to the Islamic social interest which stands for co-operation and brotherhood. Moreover, it is thought that interest creates an idle class of people who receive their income from accumulated wealth, thus depriving the society of their labour, skills, and enterprises.

Interest-Free Alternative

The Islamic solutions, commonly referred to as Profit & Loss Sharing (PLS), suggests an equitable sharing of risks and profits between the parties involved in a financial transaction. In the banking business, there are three parties - the entrepreneur or the actual user of capital, the bank which serves as a partial user of capital funds and as a financial intermediary, and the depositors in the bank who are the suppliers of savings or capital funds. There are two different partnerships of the type mentioned in Islam: the partnership between the depositors and the bank, and the partnership between the entrepreneur (or the borrower) and the bank.

Under this proposal, financial institutions will not receive a fixed rate of interest on their outstanding loans, rather, they share in profits or in losses of the business owner to whom they have provided the funds. Similarly, those individuals who deposit their funds in a bank will share in the profit/loss of the financial institution.

As opposed to the present system of banking, where bank profits arise from the difference between the interest it receives from borrowers and the interest it pays to its depositors, the source of bank profits in interest free banking is the differences in the profit sharing ratios. The entrepreneur and the bank agree upon sharing of the profit with a higher proportion going to the entrepreneur, while the depositors share a comparatively smaller proportion of the bank's profits.

The Islamic principle of Sharakah stipulates that the partners are free to determine the extent of their profit-sharing ratio regardless of their capital contributions. Losses, on the other hand, are to be shared strictly in proportion to their capital contributions. In the case of the division of the pro- fits between a financial institution and various borrowers, however, it is suggested that the central bank should be able to control the profit/loss share ratio. This practice will not only reduce unhealthy competition among financial institutions, but also enables the central bank to influence the allocation of resources among various sectors of the economy according to national priorities and monetary policy directives.

To ensure timely payment of the loan plus the institution's share of the profits (if any), a fine could be imposed on those borrowers who do not pay on time. To conform with the principals of the Shari'ah, these fines must be deposited with the government treasury rather than given to individual financial instit utions. Other punishments such as confiscation of property and blacklisting delinquent borrowers are also suggested.

Two problems have been cited as inherent in the traditional banking system, both arising from the asymmetric availability of information between the two parties involved in a financial transaction. Adverse selection refers to the possibility that potential borrowers who are the most likely to produce an undesirable outcome are the ones who more actively seek out a loan, and are thus the most likely to be selected. Moral hazard occurs when the borrower engages in activities undesirable by the lender after the loan has been granted. The PLS system addresses both issues.

Since the profit and loss sharing emphasises distribution of both risk and profits between the lender and the borrower when a loan is made, the lending institution need only worry about the profitability of the proposed project for which the loan is requested rather the credit-worthiness of the firm to which they are lending. This leads to more conservative decisions made by the lender and to a more careful monitoring of the borrower.

Similarly, in the western banking model, heavy-handed bank regulation and the availability of deposit insurance have replaced the need for monitoring bank activities by depositors. Consequently, as far as small depositors are concerned, deposits in one bank are very similar to deposits in another bank, and hence there is no need to monitor bank activities. The Islamic, interest-free system, on the other hand, imposes the burden on depositors of gathering information about the safety, soundness, riskiness, and profitability of the bank. This will eventually lead to a sounder banking system, although the unwillingness of depositors in the short run to go through the lengthy process may lead to short-term reduction of savings in the banking system.

Islamic banking research concentrates, in part, on addressing the compatibility of this mode of finance with the current global financial environment. For example, the argument that without interest the monetary authorities have no control over monetary policy may be discounted by emphasising other methods of monitoring credit such as imposing limits on cash base of the economy or through reserve requirements on banks. The question of government borrowing, especially from overseas sources, may also be resolved through allowing the payment of a rate of return that varies depending on the rate of growth of the economy or the inflation rate.

In today's world-integrated financial system, it seems necessary for all financial centres to study the feasibility of some form of interest-free activity if only for competitive purposes. How could Singapore, for example, ignore this phenomenon when its two giant neighbours are actively involved in interest-free banking? The depositors are likely to study the interest-free, profit-based option when they utilise the depository function of financial institutions, while borrowers are inclined to analyse this option with regard to its risk-cost characteristics.


--------------------------------------------------------------------------------
Copyright © 2006 Singapore Institute of Management.

Happy reading..

FaithHealer3

Originally posted by LostSoul at 2-8-2006 10:01 AM
ok faithhealer, if you are so right, do tell me which bank offer conventional loan with fixed interest rate through the tenure? not for 3 years, 5 years, bla bla bla, but 30 years?  

In Malaysia fixed interest rate banking is renamed as islamic banking. So take a look at oversea bankings. Take for example Bank of America. 30years of fixed interest rate loan is common.

Originally posted by LostSoul at 2-8-2006 10:01 AM
and again, you are wrong.. if riba is like what you said, charging interest on principal, since islamic banking does not charge interest, they merely buy the house and sell it back higher at certain percentage.. so, literally, u got it wrong...

No i am not wrong. You know that no interest charged is nothing but a BS. The fact is they islamic banks calculate the selling price based on fixed interest. I have shown you and yet you people cannot understand it.

anta

Understanding what constitutes Islamic banking
Date: 22/03/2006 , By UST HJ ZAHARUDDIN HJ ABD RAHMAN

THIRTY years ago, when outsiders began looking at Islamic banking at the international level, they were incredulous. 揌ow can you run a bank without interest?

LostSoul

fh3, that's where you got it wrong... in reality, they don't charge interest, no matter how bullshit you say it was, but in truth, they charge NO INTEREST. it is what they call profit sharing.

and do read anta posting, it's full with info. one advice from me: if you hate islam n muslim, fine.. but not all about Islam is bad (for us, all are good :bgrin

FaithHealer3

Originally posted by anta at 3-8-2006 11:04 AM
http://www.rhbislamicbank.com.my/articles/2006/03-22.htm

FH3,
Another happy reading...  

Ah cut &aste from RHB Islamic banking right.. looky what they giving.. ahem getting.. riba


Package 1 - with ZEC (For Under Construction Property Only)*  
1st Year 1.50% p.a.
2nd Year 5.00% p.a.
Thereafter 7.60% p.a.
Up to maximum of 32 years or 65 years old (whichever is earlier)



Package2 (For Under Construction Property Only)*
1st Year 1.25% p.a.
2nd Year 3.50% p.a.
Thereafter 7.60% p.a.
Up to maximum of 32 years or 65 years old (whichever is earlier)



Package 3 (For Completed Property Only)*
1st Year 1.50% p.a.
2nd Year 4.50% p.a.
Thereafter 7.60% p.a.
Up to maximum of 30 years or 65 years old (whichever is earlier)

Originally posted by FaithHealer3 at 3-8-2006 01:57 PM


Ah cut &aste from RHB Islamic banking right.. looky what they giving.. ahem getting.. riba


Package 1 - with ZEC (For Under Construction Property Only)*  
1st Year 1.50% p.a.
2nd Ye ...

ini nak gelak ni..

fh3, interest and percentage are two very very different thing. even if there is a % sign at the back of a number it is meant as a mathematical calculation, not interest...

i forgive you..