Islamic Finance
Discussion
Biker 1 said:
As a non-Muslim, I'm afraid I don't understand much about Islamic mortgages & why interest is forbidden.
Perhaps someone knowledgeable could give a concise summary?
Thought it was to do with the no gambling aspect and the perception that interest is directly or indirectly participating in gambling.Perhaps someone knowledgeable could give a concise summary?
Not sure they call them Islamic though too, Sharia maybe?
Usary was forbidden in both Christianity and later in Islam (remember the story of Jesus and the money lenders)
Like many things Christianity has moved on where as Islam still sticks with the old rules.
Islamic lending is a elaborate way to lend/borrow money without being seen to charge/pay interest and therefore stay within the religious teachings.
https://en.m.wikipedia.org/wiki/Usury
Like many things Christianity has moved on where as Islam still sticks with the old rules.
Islamic lending is a elaborate way to lend/borrow money without being seen to charge/pay interest and therefore stay within the religious teachings.
https://en.m.wikipedia.org/wiki/Usury
basherX said:
Every time I look at the principles of Sharia finance they seem to be wholly disingenuous methods of achieving the same outcomes as regular finance. Seemingly proof, if it were needed, that people will jump through all sorts of intellectual hoops to preserve their religious beliefs.
Exactly this. As Purple Moonlight indicates, replace "profit" with "interest" and spot the difference. Smoke and mirrors ...At the simplest, I see it this way,
- Lending for interest = bad. It's just renting out money.
- Investing equity = good. The investor is genuinely a risk taker in the project.
- Lending free of charge = good. There's still no money being rented out.
- Lending free of charge with some nice collateral benefits? = not so clear. But after all, it's not really renting out the money is it? And anyway, the book written a few centuries ago doesn't specifically say we can't do it so it must be OK.
I follow the faith and never understood why it was now I do having got to my 30s, worked for 4 years in an investment bank.
Simply the rich are not allowed to benefit from the poor, you are meant to help the poor and less fortunate.
Loaning someone 200k and over their lifetime taking 400k back from them is day light robbery.
Yes I know its the norm now and people might read that and think what is is problem but it is wrong whatever way you think about it.
This is how people get into debt, countries get into debt and stay in debt because of the interest element.
Regarding islamic finance, it is not really truely the way the things should be however I think in todays world its the best it is going to get.
I find it absurd that anyone wanting to get onto the property ladder and have a family home needs to be almost in their 30's and be paying off a mortgage till they are 60/70.
Not sure how people think thats a good life.
Simply the rich are not allowed to benefit from the poor, you are meant to help the poor and less fortunate.
Loaning someone 200k and over their lifetime taking 400k back from them is day light robbery.
Yes I know its the norm now and people might read that and think what is is problem but it is wrong whatever way you think about it.
This is how people get into debt, countries get into debt and stay in debt because of the interest element.
Regarding islamic finance, it is not really truely the way the things should be however I think in todays world its the best it is going to get.
I find it absurd that anyone wanting to get onto the property ladder and have a family home needs to be almost in their 30's and be paying off a mortgage till they are 60/70.
Not sure how people think thats a good life.
XMT said:
I follow the faith and never understood why it was now I do having got to my 30s, worked for 4 years in an investment bank.
Simply the rich are not allowed to benefit from the poor, you are meant to help the poor and less fortunate.
Loaning someone 200k and over their lifetime taking 400k back from them is day light robbery.
Yes I know its the norm now and people might read that and think what is is problem but it is wrong whatever way you think about it.
This is how people get into debt, countries get into debt and stay in debt because of the interest element.
Regarding islamic finance, it is not really truely the way the things should be however I think in todays world its the best it is going to get.
I find it absurd that anyone wanting to get onto the property ladder and have a family home needs to be almost in their 30's and be paying off a mortgage till they are 60/70.
Not sure how people think thats a good life.
Simply the rich are not allowed to benefit from the poor, you are meant to help the poor and less fortunate.
Loaning someone 200k and over their lifetime taking 400k back from them is day light robbery.
Yes I know its the norm now and people might read that and think what is is problem but it is wrong whatever way you think about it.
This is how people get into debt, countries get into debt and stay in debt because of the interest element.
Regarding islamic finance, it is not really truely the way the things should be however I think in todays world its the best it is going to get.
I find it absurd that anyone wanting to get onto the property ladder and have a family home needs to be almost in their 30's and be paying off a mortgage till they are 60/70.
Not sure how people think thats a good life.
Thanks XMT - that now makes some sense as to how it works. & rightly so. However, the poor in Muslim countries like Bangladesh are being royally shafted by both us in the West (£10 pair of jeans anyone?), & by the super-rich Muslims, such as the contractors building the world cup stadia in Qatar. It seems it is a nice idea, but how to make it work in practice??Sharia mortgages have always struck me as a bit of a fudge to get around the Islamic prohibition on usury.
As I understand it, a strict Muslim can't have a normal mortgage because it involves paying interest to the bank. Instead, using a Sharia mortgage, the bank buys the property first (for say £500k) and then sells it to the Muslim buyer for a significantly higher price (say £900k) where that price is equal to £500k plus the interest that would have been payable over the 25 year term of a normal mortgage. The Muslim buyer then pays back the £900k Sharia mortgage in equal installments which is okay from a Sharia point of view because no interest is being charged.
Obviously, being Pistonheads, I'm sure I will be corrected if I'm talking balls.
As I understand it, a strict Muslim can't have a normal mortgage because it involves paying interest to the bank. Instead, using a Sharia mortgage, the bank buys the property first (for say £500k) and then sells it to the Muslim buyer for a significantly higher price (say £900k) where that price is equal to £500k plus the interest that would have been payable over the 25 year term of a normal mortgage. The Muslim buyer then pays back the £900k Sharia mortgage in equal installments which is okay from a Sharia point of view because no interest is being charged.
Obviously, being Pistonheads, I'm sure I will be corrected if I'm talking balls.
Biker 1 said:
XMT said:
I follow the faith and never understood why it was now I do having got to my 30s, worked for 4 years in an investment bank.
Simply the rich are not allowed to benefit from the poor, you are meant to help the poor and less fortunate.
Loaning someone 200k and over their lifetime taking 400k back from them is day light robbery.
Yes I know its the norm now and people might read that and think what is is problem but it is wrong whatever way you think about it.
This is how people get into debt, countries get into debt and stay in debt because of the interest element.
Regarding islamic finance, it is not really truely the way the things should be however I think in todays world its the best it is going to get.
I find it absurd that anyone wanting to get onto the property ladder and have a family home needs to be almost in their 30's and be paying off a mortgage till they are 60/70.
Not sure how people think thats a good life.
Simply the rich are not allowed to benefit from the poor, you are meant to help the poor and less fortunate.
Loaning someone 200k and over their lifetime taking 400k back from them is day light robbery.
Yes I know its the norm now and people might read that and think what is is problem but it is wrong whatever way you think about it.
This is how people get into debt, countries get into debt and stay in debt because of the interest element.
Regarding islamic finance, it is not really truely the way the things should be however I think in todays world its the best it is going to get.
I find it absurd that anyone wanting to get onto the property ladder and have a family home needs to be almost in their 30's and be paying off a mortgage till they are 60/70.
Not sure how people think thats a good life.
Thanks XMT - that now makes some sense as to how it works. & rightly so. However, the poor in Muslim countries like Bangladesh are being royally shafted by both us in the West (£10 pair of jeans anyone?), & by the super-rich Muslims, such as the contractors building the world cup stadia in Qatar. It seems it is a nice idea, but how to make it work in practice??Fundementally the world we live in very rarely allows such a system to exist now: living without any form of borrowing and paying interest.
As a general concensus Muslims are advise if they need to have a mortgage to buy a house then they can do so but to becareful and not be beyond your means. Think of it as a lesser of two evils.
The way I see it from working on the investment bank - when one person gains in the markets another loses, it is really as simple as that and the financial institutions are honestly just made up of air - if everyone needed to take their money out: if it was shares, gold, bonds, deposits in a bank. The whole system would collapse.
Generally the richer pay less tax and the poor pay more in comparision to what they earn. That is why in Islam we HAVE to have 2.5% of our total assets we have every year and give it to the poor.
of course like with everything it depends who follows rules and who doesnt etc etc etc but as islam goes interest is not allowed for the reasons I mentioned, its to have as much an equal society as possible.
There will always be people richer than others but the system should be fair and I am sure near enough everyone will agree the system the world works on is certainly unfair.
Zigster said:
Sharia mortgages have always struck me as a bit of a fudge to get around the Islamic prohibition on usury.
As I understand it, a strict Muslim can't have a normal mortgage because it involves paying interest to the bank. Instead, using a Sharia mortgage, the bank buys the property first (for say £500k) and then sells it to the Muslim buyer for a significantly higher price (say £900k) where that price is equal to £500k plus the interest that would have been payable over the 25 year term of a normal mortgage. The Muslim buyer then pays back the £900k Sharia mortgage in equal installments which is okay from a Sharia point of view because no interest is being charged.
Obviously, being Pistonheads, I'm sure I will be corrected if I'm talking balls.
That is in principle how sharia lending works. The lender buys the asset and locks in their profit, then allows the end buyer to pay in installments. hence the term 'profit share'. especially expensive on a depreciating asset like cars etc.As I understand it, a strict Muslim can't have a normal mortgage because it involves paying interest to the bank. Instead, using a Sharia mortgage, the bank buys the property first (for say £500k) and then sells it to the Muslim buyer for a significantly higher price (say £900k) where that price is equal to £500k plus the interest that would have been payable over the 25 year term of a normal mortgage. The Muslim buyer then pays back the £900k Sharia mortgage in equal installments which is okay from a Sharia point of view because no interest is being charged.
Obviously, being Pistonheads, I'm sure I will be corrected if I'm talking balls.
One of the articles I read about what is historically peculiar about current strands of fundamentalist Islam pointed out that Islam has traditionally been sensible and pragmatic rather than dogmatic about adherence to the rules. I don't think finding a religiously acceptable workaround for buying a house in a place where that needs borrowing (or accepting that you have no choice but to get a mortgage in that situation) is outside of the way that Islam has historically been practiced.
Zigster said:
Sharia mortgages have always struck me as a bit of a fudge to get around the Islamic prohibition on usury.
As I understand it, a strict Muslim can't have a normal mortgage because it involves paying interest to the bank. Instead, using a Sharia mortgage, the bank buys the property first (for say £500k) and then sells it to the Muslim buyer for a significantly higher price (say £900k) where that price is equal to £500k plus the interest that would have been payable over the 25 year term of a normal mortgage. The Muslim buyer then pays back the £900k Sharia mortgage in equal installments which is okay from a Sharia point of view because no interest is being charged.
Yep - certainly seems a bit of a fudge; I see little difference between that & a regular high street bank mortgage. I guess there could be a difference if the bank was 'ethical' in that its other transactions didn't involve interest, but then surely it would have massive difficulties trading, particularly in the UK or other non-Muslim country, so therefore wouldn't be able to offer the mortgage anyway.....As I understand it, a strict Muslim can't have a normal mortgage because it involves paying interest to the bank. Instead, using a Sharia mortgage, the bank buys the property first (for say £500k) and then sells it to the Muslim buyer for a significantly higher price (say £900k) where that price is equal to £500k plus the interest that would have been payable over the 25 year term of a normal mortgage. The Muslim buyer then pays back the £900k Sharia mortgage in equal installments which is okay from a Sharia point of view because no interest is being charged.
The other side of it though, is commendable: the poor just keep getting screwed & therefore poorer, whilst the rich just keep getting richer. Perhaps we should take some of these ideas & use them in the West??
There's a pretty balanced blog with a few articles on Islamic mortgages and their limitations here...
http://islamicfinanceguru.com/2016/01/24/a-way-to-...
http://islamicfinanceguru.com/2016/01/24/a-way-to-...
Zigster said:
Sharia mortgages have always struck me as a bit of a fudge to get around the Islamic prohibition on usury.
Of course it's a fudge. Similar to orthodox Jews using timers to turn on and off lights and ovens during the Sabbath, because they are not allowed to. Completely overlooking the fact that the principle is being breached.I don't believe in God but if there is one, then surely he won't be stupid enough to fall for all the nonsense that the religious put in place to basically get around his rules. These people are in for a shock on judgement day.
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