I was wishing MuslimMatters would write a piece on this! Yes, in the matter of a mere week, the world has gone from laughing at us for not aping their stupidity to wailing and wringing their hands. I guess the moment warrants sympathy, but I sometimes I can’t resist gloating in the failure of the cheaters, even if I hurt a little bit too.

At the end it all goes back to RIBA. RIBA is not Usury but Usury is RIBA.
RIBA means to excess or increase. So when I give you 100 of X and you give me 100,0000001 of X it is RIBA. In X you could put, gold, silver, dates, rice,…

Got this here:

i. Islamic Shariah prohibit Riba in all its form.

ii. Riba is a tool of oppression that allows elites and rich to suck the block of poor and needy.

iii. Riba consumer are at war with Allah (swt) and his Messenger Prophet Mohammad (pbuh)

iv. Linguistically the word Riba ( ) means to increase, to grow, to exceed, to be more.

v. The basic example of Riba is in monetary credit transaction, where borrower has to pay “interest” on
loaned amount.

vi. In Shariah meaning “Riba” is a term that is used when two parties exchange item of same kind, and in
return one party received extra (or in excess) of what he gave. A simple example is when gives 100 units
of Gold and received 120 units of Gold in return. The extra or excess 20 units are considered “Riba”.

vii. Riba is opposite of Charity (Zakat). While it seems to riba-consumer that their money increase with Riba,
but in reality money decrease with Riba, and money increase with Charity (Zakat). This is testified by
Allah (swt) in Quran. However, a riba-eating brain can not comprehend such noble thought.

2:276 Allah destroys interest and gives increase for charities. And Allah does not like every sinning
disbeliever.

viii. Islamic Shariah promotes Charity and forgiveness. If a needy person can‟t repay loan, it is considered
Kamal ( ) to forgive his loan.

2:280 And if someone is in hardship, then [let there be] postponement until [a time of] ease. But if you
give [from your right as] charity, then it is better for you, if you only knew.

ix. Riba cannot be justified by any reason. It is neither like “trade”, nor like “rent”, nor like “profit”. In fact,
it‟s a reward of laziness where lender wants to make money without working.

x. Prophet (pbuh) prohibited giving Riba, taking Riba, consuming Riba, recording of Riba, and witnessing
Riba, and considers them all alike.

xi. Whoever live in Riba will have his eternal abode in hellfire.

2:275 But whoever returns to [dealing in interest or usury] – those are the companions of the Fire; they
will abide eternally therein

MR-

I was thinking more or less the same thing. I’ve been dabbling in stocks for about a year now. I’ve looked over the relevant fatawa and guidelines and scrutinized each purchase – making sure, of course, to steer clear of financial institutions.

Now, against my will, I’m made part owner of three or four (I lost count) failing houses of riba. Good grief.

On another note, I’ve been reading MM’s posts on financial matters and, although I think they’ve covered a wide swath of the economic landscape, one critical matter hasn’t been touched on at all. Namely, what does a Muslim in the West do about insurance? Ibnabeeomar wrote about Islamic ways to purchase a house, but neglected to mention how one could possibly afford to repair his home should a catastrophe strike. Moreover, health costs can easily bankrupt an individual – especially one just starting out on his own.

I have come across the many scathing scholarly opinions on the practice of insurance, but short of suggesting takaful (which, to my knowledge is not available in the U.S. – at least on a wide scale basis), they offer no alternatives.

there is a good article on the freakonomics blog explaining the mess:
http://freakonomics.blogs.nytimes.com/2008/09/18/diamond-and-kashyap-on-the-recent-financial-upheavals/

http://www.time.com/time/nation/article/0,8599,1843168,00.html?cnn=yes

Also, @ Siraaj -

I came across this article about the resurgence of Islamic finance in the States. It mentions your critique (per the interview you paraphrased) and quotes a rep from one of the Islamic mortgage firms as follows: “To the bait-and-switch critique, the industry’s proponents respond that the difference is there because Islamic law sees one, even if functionally it’s hard to find it. “It’s like the difference between a wife and a live-in girlfriend,” says David Loundy, vice president of the Chicago-based Devon Bank, a national leader in Islamic finance. “They may serve some of the same functions, but there’s a legal difference between the two, in terms of inheritance and taxes.”

Notably, that rep is associated with Devon bank, which the AMJA (and Ibnabeeomar) endorsed. Does this put a whole in your reasoning?

@Al Iskandarani

Absolutely not, and I’ll give you one big reason why other experts and professors of economics who were cited in that article as well take my side and consider it window dressing, and further, why Devon Bank’s word cannot be taken on this, though they offer shari’ah compliant loans:

1. The contract which your quote supports in the context of the article is one in which the owner is selling something to the buyer before he even owns it. Scroll just a little higher, and the contract in which the bank buys and owns the commodity, then sells it for a fixed price with installments is crucial to understand – that is legitimate, and that is what Devon Bank does in their shari’ah compliant model as well. The other contract is illegitimate – you cannot sell what you don’t own, but the terms are specified as such in the contracts and people take this as shari’ah compliant.

2. As for Devon Bank, they also have a non-shari’ah compliant model for loaning out money to Muslims alongside the correct one – if you’ll view their website for the different models they offer, one of them is incorrect model, and so they have a vested interest in saying what they’ve said.

Its like putting a ring on the live-in girlfriend and saying, “This is my wife.”

Siraaj

Siraaj-

Perhaps I misunderstood. Your first comment seemed to be a general denunciation of Islamic mortgage products based on your perception that there is little difference (essentially, only the name) between them and their outright riba-based counterparts. The quote I inserted from the article (which, in re-reading it, appears to be a general allusion that doesn’t refer to any particular Islamic mortgage instrument) seems to counter your notion by stating that although, superficially, the options that Islamic banks offer appear to be the functional equivalents of traditional loans/mortgages, the actual structure (and, perhaps, niyya) of these agreements make them Islamically sound.

Now, truth be told, I’m actually a bit skeptical myself – the ‘lipstick on a pig’ analogy comes to mind; or, as you put it, a “ring on a live-in girlfriend” (nice line, btw :) ). My intention was to try and see where you were coming from. Contrary to what I gathered from your original comment, your recent remarks indicate that you believe at least one form of Islamic loan is acceptable (presumably the murabaha version). I’m not sure I follow your reasoning though. You state that only one of the products the article mentions is sound because the bank sells a physical asset, but it appears that both the murabaha & musharika agreements meet that criterion. What makes the latter contract invalid?

-AI

LIVE WEBMINAR
with Sheikh Tawfique Chowdhury

Monday 10 Nov 2008
9.00pm – 10pm Online (GMT)

10 Things that you never knew
that you never knew about Business Transactions in Islam!

Join Alkauthar Online to hear some of the most amazing facts
that you have ever heard about Business Transactions in Islam.

You wont believe your ears!
Your place awaits you. Enrol now and join us!

To enrol for this free webinar please click
HERE