Posts Tagged ‘Riba’

Please find enclosed a copy of Benedikt Koehler’s text on the application of market based principles extensively throughout out the early and later eras of Islam.

I hope to write more about this enlightening piece in a later post, but meanwhile, please do download a copy and read all about the history you never knew

Early Islam and the Birth of Capitalism – Benedikt Koehler

Also view the following presentation delivered in the City of London at the Legatum Institute, which includes a Q&A

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Consider this post in reference to the concept of derivatives.

I feel that if anyone wants to attempt any critique of the derivatives market in its entirety, one has to move past any continued emphasis on ‘casino capitalism’, as this is an oft repeated line which, whatever its merits or otherwise, has become an easy reply for those who favour such practices.

I believe one needs to concentrate on debunking the notion of risk management in order to effectively retort.

Many supporters of derivatives would rightly point to their use is not just to speculate with (as in Investment Banking), but as a valid means to manage risk, especially in Insurance, and it is this aspect which deserves further attention in my humble opinion

The above linked post brilliantly draws together the notion of colonising time as an integral commodity, matching any such physical asset, thereby shinning a much needed light on the important and neglected aspects of this discourse of, post colonialism and global racial financialisation.

The findings imply that Islamic banks are not different from conventional banks, except for different branding to cater for a different category of clients

(INCEIF 2016)

A 2016 study in Malaysia, one of the most prominent centres for Islamic Finance, compared the two kinds of institution in order to ascertain if the difference between the two are genuine or merely superficial. It lends weight to the latter judgement.

What does this say about the industry from a body set up to proliferate the understanding of it? Learn more about the ICEIF here

A few of my previous posts have covered attempts by various parties to introduce their own versions of a financing method closer to what is perceived as genuinely riba-free.

To name a couple, Ansar Finance in the UK, Grameen Bank from Mohammed Younus have made an effort to shed light on alternative models which are closer to interest-free financing, in that an interest derived rate is not charged to the customer.

Ofcourse, the wider context of this should not be forgotten – the money itself, the paper (or digits) we use as a means of transaction – is of interest and IS interest itself. Given this fundamental fact, one cannot escape true defined RIBA in any such method outlined in these endeavors.

However, designing alternative models can expose the wider audience to the weaknesses of the mainstream Islamic Banking practices, which are all in name not in spirit, and I find it refreshing and worthwhile to introduce different forms which may be used as a stepping stone to something widely accessible and equitable in future, Insha Allah.

Contributing to this intiative, are LARIBA, a US based institution who have introduced their own version of what they feel is a RIBA-free mechanism. Judge for yourselves weather you feel their method is actually viable, however this company has been established since the late 1980’s and I favour their understanding of the monetary system, even though they still resolve to make use of it. They too understand and are upfront with their clients about the debt enslavement aspects of interest based loans, and also draw attention to the wider Islamic Banking industry which still uses interest rates in their products.

Their website has a number of worthy materials on related topics which I would also like to recommend.

https://www.lariba.com/sitephp/index.php

Allah (SWT) knows best about their intentions and actions.

 

 

 

Adding this Imam to the prominent few scholars that truly understand money and the nature of Riba, this lecture demonstrates the misunderstandings of other Muslim commentators when faced with this holistic issue.

The content is not new, much of it has been covered extensively in other posts.

Another text exploring how an alternative system could, in theory function, although this is simply one interpretation. By G.A.Parvez

http://islamicdawn.com/wp-content/uploads/2015/01/The-Quranic-System-of-Sustenance-by-G-A-Parwez-Tolue-Islam-Trust.pdf

 

I find it remarkable how many non-familiar observers can quite easily spot the obvious spade in Islamic Finance practices, and call it a spade. However, for them to then completely ignore the issue that the source guidance (the final proclaimation and criterion; The Qur’an) never accepted any favourable position on RIBA (not interest, in any form, simple or compound), and that the deceit or falacy here should be put only at the doorstep of the commercial banking industry and its proponents who invented this fraud.

There seems to be too much of an impression that underlying islamic principles are in someway contradictory; with one hand they oppose ‘interest’ and with the other hand, it is condoned in another form, under another name.

This post will not go into the essential issue of what RIBA is (a more fuller all encompassing term) and not interest, however suffice to say, those who are of the above opinion have only a crass, superficial understanding of what they reject whilst at the same time, plenty of effort is put into unearthing great myths from other elements they wish to debunk – that is what I find odd.

One such guilty party would be the Adam Smith Institute. Their article found here, which references Islamic Finance practices makes this obvious mistake. In a partial response to the issue of time value if money and the innate nature of things, I would also like to refer readers to this piece by Tarek El Diwany

But I want to instead highlight an aspect which once again exposes the current industry for its flaws in constructing alternatives which are not too different from the products they are based upon;

For they all (things like Sukuk bonds and so on) depend upon the absolute rejection of interest, that very thing that we insist is part of the fabric of our reality. The reason we so like Islamic finance is because all of he (sic) successful forms of it are actually constructs that, in the face of the religious insistence that there should be no interest, actually operate in a manner to ensure that there is a time value to money and that there is an interest rate, interest which has to be paid 

Another cat let out of the bag, but wait there is more. The article referenced in the above quoted piece, by Jon Fasman reading a book by Harris Irfan, also provides us with more of the truth;

Yet by the end of the book, Irfan seems genuinely conflicted about his industry. Most of these instruments were reverse-engineered from their secular counterparts, and so devised to comply more with Shariah’s letter than its spirit. His protests against such moves echo those of American politicians who condemn “tax inversions”

….Many of the instruments Irfan discusses were sold by major banks that saw them as just another opportunity. This is not surprising: Governments and wealthy individuals wanted financing that complied with their religious requirements, and banks gave it to them….