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The Failure of Islamic Finance

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By John Foster, former editor, Islamic Business & Finance magazine

The Islamic finance industry has often battled with the question: How Islamic is Islamic banking?

The question’s pertinence was raised in March last year, when Sheikh Muhammad Taqi Usmani, of the Accounting and Auditing Organization for Islamic Finance Institutions (AAOIFI), a Bahrain-based regulatory institution that sets standards for the global industry, said that 85% of Sukuk, or Islamic bonds, were un-Islamic.

Usmani is the granddaddy of modern-day Islamic finance, so having him make this statement is synonymous with Adam Smith saying that free-markets are inefficient.

Because Sukuk underpin the modern-day Islamic financial system, one of its pre-eminent proponents arguing that the epicentre of the system was flawed sent shockwaves through the industry.

It also gave ammunition to the many critics who see Islamic finance as an industry more driven by cultural identity than practical problem solving: as a hodgepodge of incoherent, incomplete, impractical and irrelevant ideas.

Recognisable products

The products that modern-day Islamic bankers have created are very similar to conventional products.

So similar, in fact, that to an outside observer they could be considered the same.

Islamic banks now offer Islamic mortgages, Islamic car loans, Islamic credit cards, Islamic time deposit and guaranteed return accounts, Islamic insurance and some even offer Islamic managed and hedge funds.

This point is conceded by Samir Alamad, Sharia, or Islamic law, compliance and product development manager of the Islamic Bank of Britain.

“The industry does not want to alienate its products,” he says.

“They have to be recognisable, produce the same outcome as conventional products, but remain within the guidelines of Sharia.”

No interest

The core of Islamic economics is a prohibition on interest.

This immediately creates a problem for Islamic banks, as conventional banks charge borrowers an interest rate through which they can reward their depositors and make some profit for being the broker.

With interest ruled out it is harder to make money.

The modern Islamic banker has found a way around this prohibition, however.

As in many Islamic products, the bank enters a partnership with its depositors and invests his money in a Sharia compliant business.

The profit from this investment is then shared between the depositor and the bank after a set time.

In many cases this “profit rate” is competitive with the conventional banking system’s interest rate for savers.

Lease agreements

Alternatively, an Islamic banker might enter into a lease agreement for a car or a house with an individual.

The bank would buy a vehicle outright and then lease it back to the person who wanted it, over a time period that would ensure that the capital was repaid and the bank made a profit.

Alternatively the bank would enter into a partnership with a person wanting to buy a house. The bank would buy 70% of the house, the individual 30%.

The bank then rents its share of the house back to the individual until the house is fully paid for.

The bank makes a profit on the rent, which would be higher than equivalent rents in the area, but on an annualised percentage basis, would look very much like a conventional mortgage interest rate.

To the casual observer, a spade is a spade.

Whether the product is dressed up in Arabic terminology, such as Mudarabah, or Ijarah, if it looks and feels like a mortgage, it is a mortgage and to say anything else is semantics.

Sophisticated finance

The potential wealth locked up in oil-rich Gulf states encouraged the conventional banks to enter Islamic finance.

HSBC established the Amanah Islamic Finance brand in 1998 and Deutsche Bank, Citi, UBS and Barclays quickly joined the fray, all offering interest-free products for wealthy Arabs.

However, this new generation of Islamic bankers had cut their teeth in the City and Wall Street, and were used to creating sophisticated financial products.

They often bumped heads with the Sharia scholars who authorised their products as Sharia compliant.

However, these bankers had a way of dealing with this, as one investment banker based in Dubai, working for a major Western financial organisation explains:

“We create the same type of products that we do for the conventional markets. We then phone up a Sharia scholar for a Fatwa [seal of approval, confirming the product is Shari’ah compliant].

“If he doesn’t give it to us, we phone up another scholar, offer him a sum of money for his services and ask him for a Fatwa. We do this until we get Sharia compliance. Then we are free to distribute the product as Islamic.”

No consensus

This “Fatwa shopping”, which was carried out by some institutions, brings us back to the Sharia scholars.

Even these scholars do not agree all the time, which means that in some cases a product is deemed Sharia compliant in one market and not in another.

This is especially the case with Malaysian products, which are often deemed not Sharia complaint in the more austere Gulf.

“Often no rulings exist for modern day problems, such as use of narcotics,” Alamad explains.

“In Islam intoxication by wine is forbidden, but at the time of the Prophet Mohammed there was no crack cocaine.”

Modern scholars had to interpret the rules on intoxication, and the consensus was that crack should also be forbidden to Muslims, as it is a dangerous intoxicant.

“This is how we make rulings, whether in finance or societal,” Alamad says. “The consensus rules, which usually will become mandatory for all Muslims to follow, but there are some opinions and sometimes scholars are not in the consensus.”

Banking is banking

This makes it more important to be in the consensus, and so getting a favourable ruling from a leading Sharia scholar is important for a product manager.

That is why the top scholars can earn so much money – often six-figure sums for each ruling.

The most creative scholars are the ones in the most demand, says Tarek El Diwany, analyst at London-based Islamic financial consultancy Zest Advisory.

“To date, most Islamic financiers have been looking at examples of financing in Islamic history and figuring out how to apply them to today’s financial products.”

But banking is banking.

It is the taking of a deposit and then using it to finance a purchase or business.

The lender pays the depositor compensation for the opportunity cost of his money, and the person borrowing the money “rents” it off the bank.

The same symbiotic relationship occurs whether it is conventional banking, ethical banking, Islamic banking or Presbyterian banking.

As Majid Dawood, chief executive of Yasaar, a UK-based Islamic finance consultancy says: “Everything that is not forbidden in the Holy Qur’an is OK.

“Yes, the industry has to evolve, but it is only 40 years old and its competing with a conventional finance system that is over 800 years old.”

Source: BBC News

64 Comments

64 Comments

  1. Avatar

    Dilla

    July 15, 2010 at 3:50 AM

    “The bank makes a profit on the rent, which would be higher than equivalent rents in the area, but on an annualised percentage basis, would look very much like a conventional mortgage interest rate.

    To the casual observer, a spade is a spade.

    Whether the product is dressed up in Arabic terminology, such as Mudarabah, or Ijarah, if it looks and feels like a mortgage, it is a mortgage and to say anything else is semantics.”

    Is it just semantics? Are the consequences of defaulting on one of these loans the same as regular mortgages? I would think it wasn’t, Islamic banks bear higher risks therefore, understandably, their products are more expensive. He hasn’t explained anywhere, specifically, what makes their loans haram? Why does Shaykh Taqi Usmani say most sukuk bonds are un-Islamic, that would be interesting to know.

    I doubt they are haram merely because they imitate regular loans in the rather superficial way he has outlined, it’s like saying halal lamb sausages are dodgy simply because they look like pork sausages. There must be something in the ‘background’ of the loan which isn’t quite kosher.

    • Avatar

      asawb

      July 16, 2010 at 9:47 AM

      +1

    • Avatar

      Junaid

      July 16, 2010 at 4:21 PM

      uhhh… did you miss the part about bribing scholars with six figure sums to obtain a fatwa?

    • Avatar

      Yunus

      July 16, 2010 at 6:09 PM

      Banking will always be banking….all based on INTEREST!! Anything based on interest as a foundation is doomed to fail as we have witnessed in the western world over the last few years.

      Islamic banking, I have to say is NOT so “Islamic”, and in my opinion be termed as “BACK DOOR RIBA”….and on riba is where the curse of Allah swt. is.
      South African Ulama have been telling the world about Islamic “Halal” Mortgage as not “Islamic” at all, but the average Joe on the street is made to believe that it is Islamic. Whats so Islamic about a mortgage?? Unfortunately all of us have been fooled so that we partake in this Riba system…remember the hadith ….
      “There will come a time,” he said, “when you will not be able to find a single person in the
      world who will not be consuming riba. And if anyone claims that he is not consuming riba then
      surely the vapor of riba will reach him.” (Abu Daud, Mishkat. In another text “THE DUST OF RIBA WILL REACH HIM.”)

  2. Avatar

    Muhammad Saeed Babar

    July 15, 2010 at 4:40 AM

    “But banking is banking.

    It is the taking of a deposit and then using it to finance a purchase or business.

    The lender pays the depositor compensation for the opportunity cost of his money, and the person borrowing the money “rents” it off the bank.”

    As the above quote from the article very clearly shows that current conventional banking model is to earn an assured sum of money for the lender and making money on the difference of lending and borrowing rates. The same model is being copied as such and is being “Islamized”.

    One can have illegitimate sexual relationship by using the very legitimate contracts of marriage and divorce, the difference is of intention from the very beginning. If there is an intention of marrying for a given period and then divorce, can it be said “legitimate” or “Islamic”? The same is the case with our Islamic banking products. It is “slicing” an Islamic contract and then “dicing” to create an Islamic banking product whose ultimate purpose is an assured return to lender irrespective of any business risk and this is pure “Riba”.

    “Fain would they deceive Allah and those who believe but they only deceive themselves and realize (it) not!” Aya 9 of Sura Al-Baqara

    “And cover not Truth with falsehood nor conceal the Truth when ye know (what it is).” Aya 42 of Sura Al-Baqara

    “And there are among them illiterates who know not the Book but (see therein their own) desires and they do nothing but conjecture.” “Then woe to those who write the Book with their own hands and then say: “This is from Allah” to traffic with it for a miserable price! Woe to them for what their hands do write and for the gain they make thereby.” Ayat 78-79

    Narrated Umar bin Al Khattab

    Allah’s Apostle said, “The reward of deeds depends upon the intention and every person will get the reward according to what
    he has intended. So whoever emigrated for Allah and His Apostle, then his emigration was for Allah and His Apostle. And whoever emigrated for worldly benefits or for a woman to marry, his emigration was for what he emigrated for.” Sahih Al-Bukhari

  3. Avatar

    'Uthmaan

    July 15, 2010 at 6:03 AM

    How Islamic finance missed heavenly chance: http://news.bbc.co.uk/1/hi/business/8388644.stm

  4. Avatar

    'Uthmaan

    July 15, 2010 at 6:07 AM

    I also found this article on a Non-Muslim website:

    I Want The Earth Plus 5%: http://www.relfe.com/plus_5_.html

    • Avatar

      Muhammad

      July 15, 2010 at 7:31 PM

      Amazing article!

  5. Avatar

    Dubai-M

    July 15, 2010 at 6:23 AM

    Most of the people think that the Islamic Banking is similar to conventional banking and there is not much difference between the two. Even if the people believe that the Banks are not talking any kind of interest from them they still think that the Bank will use the money in a business which is interest based. In my opinion Banks must tell their market where they are going to invest the money and the profit will actually be profit and not the income from any kind of interest. Only then people will start believing that the Islamic Financing is truly great.

  6. Avatar

    Dilla

    July 15, 2010 at 6:46 AM

    Muhammad Saeed Babar, with respect, your analogy to temporary marriage contracts is incorrect. Mut’a marriages are considered haram by Sunni ulema. It is not unlawful for an individual or an organisation to lend/invest money intending to gain a profit. It is only haram if the lending/investing is based on a contract which stipulates a guaranteed fixed return regardless of profit, i.e. interest. riba. Do these Islamic loans contain this type of condition?

    It seems people are more annoyed that Islamic banks are making a profit, or making returns similar to conventional banks, and? What you expect them to make a loss or to be more Islamic they must make less returns than conventional banks? Again, for clarity in this matter we need to be shown how and why these loans are dodgy. Histrionics, quoting Qur’an and hadith to do so, do not help. Makes your argument weaker in fact.

    • Avatar

      RZ

      July 15, 2010 at 9:06 AM

      Dilla,

      I agree with you that they do need to go in more detail as to why these Islamic loans don’t play up to a halal level. However I strongly disagree that quoting Qur’an and hadith makes arguments weaker. In fact, I say NOT quoting them makes it weaker. And besides during the detail process, their going to have to quote them in order to make us understand why it is halal/haram. I think brother Muhammad did a good job as I personally believe most Islamic finance systems fall into the categories of those verses. But that’s just my opinion.

      • Avatar

        Dilla

        July 15, 2010 at 1:28 PM

        Quoting ayat and hadith as proof to show how something goes against Shari’ principles is one thing (still problematic for the unqualified still), but quoting ayat and hadith in a threatening manner “you are wrong because I say so and this is what Allah says about you”, and not even explaining how they are wrong…. That is a ploy of people with weak arguments, calling to emotion.

        For example the ayat – “And there are among them illiterates who know not the Book but (see therein their own) desires and they do nothing but conjecture.” Could very well be applied to M Babar, you or me.

  7. Avatar

    Farhan

    July 15, 2010 at 10:19 AM

    I want to drop my two cents as a student of Economics. The US government has historically made various kinds of high yielding securities illegal. But savvy investors have always found ways to earn that rate of return while still following the law. There was no central financial body that taught everyone the proper way to invest, they figured it out on their own. Likewise, all we need IMO is to be clear on what is forbidden by Allah and the market will find a way. And after all, the alternative way to finance (equity financing, not liabilities) is essentially the same as stocks so I’m sure this shouldn’t be too hard. Allahu ‘Alim

  8. Avatar

    Kashif H

    July 15, 2010 at 10:42 AM

    salaam aleikum,

    there is a larger, global dimension to this, which came out in public around the same time that bank bailouts were occuring in the U.S., some of the TARP money was used in bailing out these “shariah-compliant” scams (see below):
    ——————————————–
    Dealbook
    A Financial Mirage in the Desert

    A visitor takes a photograph at Ski Dubai, an indoor ski slope in a shopping mall in the emirate.

    By ANDREW ROSS SORKIN Published: November 30, 2009
    source: http://www.nytimes.com/2009/12/01/bu…20dubai&st=cse

    The investments were supposed to be blessed, and the bankers were desperately looking for more people to bless them.

    It was about two years ago, and I was in Dubai to cover an investment conference at a hotel along Jumeirah Beach. Hundreds of Western bankers dressed in Savile Row suits were packed into an enormous room to bone up on the intricacies of the next new thing in financial products: Shariah-compliant investments.

    They wanted to sell them to wealthy, oil-rich Muslim investors who needed a way to increase their fortunes but whose options were limited. Any investment vehicle needed to conform to the spirit of the Koran, which forbids any investments that pay interest. No mortgages. No bonds. No clever derivatives. Just tangible assets in the so-called real economy.

    It was a big honey pot — worth as much as $1 trillion that could yield billions in fees — and the bankers were determined to find a way in.

    One discussion was led by a British banker from Barclays who had moved to the region to create an entire Shariah-compliance team. He shared tips about various ways to create “structured products” that would pass muster with Muslim investors. (To me, the investments looked like bonds, walked like bonds and talked like bonds — but he never called them that.) Some of the bonds that Dubai World is in jeopardy of defaulting on, by the way, are Shariah-compliant sukuk. Just don’t call them bonds.

    He was struggling to hire enough Shariah scholars, he said, and he needed them to bless the investments — apparently there was a shortage of properly trained Islamic scholars who did this kind of work.

    With the benefit of hindsight — and you didn’t need much — there were plenty of other signs back then that Dubai was building a financial mirage in the desert.

    With hours to kill before a late-night flight, I ventured over to the Ski Dubai indoor ski run. It’s a pretty good bet that a city with an average temperature of 90 degrees and an indoor ski slope is probably living a little too large. On one ride up the chairlift, I sat next to a 7-year-old from London who had just moved to town. With a big grin, he proudly told me that his father was in “the real estate business.”

    For the last couple of years, the running joke on Wall Street was “Dubai, Mumbai, Shanghai or goodbye.” If you were the C.E.O. of a troubled investment bank desperately looking for cash, you made a pilgrimage to one of those three cities with hat in hand. They were the places most likely to write a quick billion-dollar check; their eagerness should have also been a tip-off. Now you have to wonder about Mumbai and Shanghai, too. Are they next in line to take a fall?

    Willem Buiter, a former Bank of England official who was hired as chief economist of Citigroup on Monday, says that Dubai’s credit crisis is just the natural progression of “the massive build-up of sovereign debt as a result of the financial crisis.” He wrote on his blog on The Financial Times’s Web site that the contraction of credit “makes it all but inevitable that the final chapter of the crisis and its aftermath will involve sovereign default, perhaps dressed up as sovereign debt restructuring or even debt deferral.”

    With all the money pouring into the region, it would have been hard for any doomsday types to make themselves heard. But there were whispers here and there, pointing out the obvious. David Rubenstein, the co-founder of the private equity giant Carlyle Group who was in Dubai at the conference, remarked to me at the time: “You know, they don’t have any oil here.”

    That fact was overlooked by many investors who didn’t want to miss out on a quick buck. What about the risk? The view was, and apparently still is, that if Dubai gets in trouble, its oil-rich neighbors in Abu Dhabi will bail everyone out to avoid damage to their collective reputation and, by extension, the region’s economy. Just as the United States stood behind its banks, in part, to avoid losing the confidence of foreign investors, Abu Dhabi might have to do the same.

    That had to be what Citigroup, with its firsthand expertise with bailouts, must have been thinking when it lent $8 billion to Dubai last year. Oh, and here’s an interesting fact: Citigroup made the loan to Dubai on Dec. 14, 2008. Take a look at the calendar — that’s after it received tens of billions in TARP funds. Citigroup’s chairman, Win Bischoff, said at the time, “This is in line with our commitment to the U.A.E. market in general, and reflects our positive outlook on Dubai in particular.” Good call. And what became of all those Shariah-compliant financial instruments that were the hot topic of that panel I attended? It turns out that many of them that were sold prior to the crisis weren’t compliant at all.

    The Shariah Committee of the Accounting and Auditing Organization for Islamic Institutions, which is based in Bahrain, ended up changing the rules to make them stricter because of widespread abuse. As Mr. Buiter described them on his blog, “these were window-dressing pseudo-Islamic financial instruments that were mathematically equivalent to conventional debt and mortgage contracts.”

    Blessings, alas, can do only so much.

  9. Avatar

    Mezba

    July 15, 2010 at 12:29 PM

    I have always asked any business – how do you make money? “Islamic” banking should be able to answer that question as well – in very simple SIMPLE terms. After all, the way you make money should boil down to a 30 second explanation that is easily understandable.

    Yet, most of the time it seems they go into complex arguments or mechanisms which to me just sounds like a way to get out of Allah’s laws on a technicality. I had once asked a question on my blog on why ANY one would lend a sizeable sum of money for no return (no interest). Till today I have not got a satisfactory answer.

    At RIS, I actually asked a couple of the merchants in the bazaar section, who were hawking “Islamic Finance Bonds” (now there’s an oxymoron if there was one) as to how it exactly worked. They started to speak, and soon I was left thinking, “Boy, this is just one big scam! They are not dealing with interest, but they just take it and call it something else!”

    • Avatar

      Sidiq

      July 15, 2010 at 12:46 PM

      I had once asked a question on my blog on why ANY one would lend a sizeable sum of money for no return (no interest). Till today I have not got a satisfactory answer.

      There is one I can think of. Allah says that He will multiply the rewards and bounty for those who spend in His Way and give a good loan:

      “Those who give alms, both men and women, and lend to Allah a goodly loan, it will be doubled for them, and theirs will be a rich reward.” (Al-Hadid: 18)

      • Avatar

        Mezba

        July 15, 2010 at 12:48 PM

        With due respect, alms and loans are different. Giving alms is like giving a loan to Allah which is guaranteed return many times over. If you are bank where people have deposited money, WHY would you give someone $200,000 to buy a house?

        • Avatar

          Sidiq

          July 15, 2010 at 1:02 PM

          I think the loan itself would be extortionate unless of course the person taking it is on a six-figure salary. If there is a realistic chance of the person paying it back on an agreed plan or within a reasonable period of time, then there is no harm for the bank in giving such a loan as they are secure. I just thought of a business proposition for a bank, perhaps they can charge those that are depositing, a fixed amount of money per year for their services, that way there is halal income and profits for the bank. As for the loan, I have no idea how that would work, there would need to be some study of Islamic economics to analyze cash flow and profitability from an Islamic perspective. This subject is on the agenda at this year’s ilmsummit, which ironically I had to turn down due to lack of finance.

          Allah knows best.

        • Avatar

          Abu Noor Al-Irlandee

          July 15, 2010 at 1:24 PM

          Mezba, the contracts can be structured in different ways, but the basic idea is that the Islamic financer goes into a partnership with the person who wishes to purchase the house. They make money off of rent payments that the person who wishes to buy the house pays to them for their share of the ownership of the house (since the person gets to live in the house) while at the same time the person is buying their ownership share from them gradually so that at the end of the term the buyer becomes 100 percent owner.

          Unfortunately the process is structured to be able to look the same as a standard mortgage for a variety of reasons including what customers want, what regulators want, what is needed for IRS tax deductions, etc.

          • Avatar

            Mezba

            July 15, 2010 at 1:30 PM

            The problems with these arrangements is that

            1) They combine several transactions into one – something not acceptable in Islam. Is it a sale, lease, purchase, rent, mortgage?

            2) The owner of the house has certain responsibilities under law. Property tax, insurance, utilities, etc. Under the arrangement you mentioned, the bank is part owner of the house – yet in no Islamic finance arrangement does the bank pay for any of these.

            3) What if the owner decides to live elsewhere – can they rent “their portion” of the house? What if they wished to sell?

            4) Why is this “rent” renegotiated every 3-5 years and it also oh-so-surprisingly matches the LIBOR rate in some cases?

          • Avatar

            Abu Noor Al-Irlandee

            July 15, 2010 at 1:36 PM

            Mezba, I’m a bit lost.

            Indeed most of your questions above are precisely the issues that are addressed in the fatawa of the scholars that attempt to determine if the contracts are halal or not.

            I am not interested in defending them, nor am I qualified to give a fatwa.

            I thought you asked, in simple terms, how is the Islamic financier supposed to make money and I answered your question.

    • Avatar

      BrownS

      July 15, 2010 at 7:46 PM

      Salaam

      @Mezba: The answer to your question IMHO is that by investing/lending you avoid paying zakat. So it’s not that you have to create an alternative to a positive rate of return, you’re avoiding a negative rate of return. That’s what’s supposed to motivate Islamic lending, whether it be for banking or for any other investment. In most non-Islamic systems people lend (or deposit) because they want to MAKE money. In the Islamic system you lend because you want to avoid LOSING it. Paying zakah is the default in the Islamic system, staying at zero is the default in other systems (it’s actually not because of inflation, but ignore that for now). This should stimulate economic activity.

      If you think about it this is the only system that makes sense because otherwise you have the bankers getting the world and 5% (someone linked to that great article above).

      • Avatar

        BrownS

        July 15, 2010 at 7:51 PM

        I meant to say that it may not necessarily be a bad niyyah to want to avoid zakah because you’re fueling economic activity and helping someone out instead.

  10. Avatar

    Mezba

    July 15, 2010 at 12:31 PM

    And another question, and quoting from the BBC article ,

    “Yes, the industry has to evolve, but it is only 40 years old and its competing with a conventional finance system that is over 800 years old.”

    My question – why was the industry only 40 years old? If Allah has forbidden interest (and I write ‘if’ because there is some debate on the meaning of the word ‘riba’) then why is the industry not 1400 years old? How were people borrowing 40 years ago?

    • Avatar

      Hassan

      July 15, 2010 at 1:06 PM

      Because people only bought things they could afford? And others, friends and relatives gave qard-e-hasana (to help the brother in need to get reward) to help the person buy/make house.

      Perhaps only 40 years ago muslim people wanted to make money off people need I guess and do it as business

      • Avatar

        Mezba

        July 15, 2010 at 1:22 PM

        A simple wiki search will tell you it’s not true – muslims engaged in commerce since the earliest times. In fact, the word cheque comes from the Arabic word ‘sakk’.

        • Avatar

          Hassan

          July 15, 2010 at 1:30 PM

          I am talking about loans/finance, not trade.

        • Avatar

          Abu Noor Al-Irlandee

          July 15, 2010 at 1:31 PM

          Mezba, it is precisely the type of contracts that were used by Muslim traders and merchants in the medieval period that modern “Islamic financers” attempt to emulate, since those contracts were approved by fuqaha of the time.

          I’m not a finance expert, but it should go without saying that the pre-Industrial revoution economy was drastically different from what exists in the world today. Through most of Islamic history, Muslims lived in economies where wealth was based almost entirely off agricultural surplus. although there were always traders and merchants there was nothing like the modern financial industry.

          Allah knows best.

    • Avatar

      Dilla

      July 15, 2010 at 1:40 PM

      I think he meant 40 years since Islamic banks entered the Western financial system, not literally when Muslims started buying, selling and lending. These transactions have been going on for longer than 800 years.

  11. Avatar

    Abu Noor Al-Irlandee

    July 15, 2010 at 2:24 PM

    As a larger point, I want to say that I think scrutiny for the Islamic Finance Industry is good. Let’s make it constructive scrutiny designed to find out who’s doing the best job, who’s working hard to make true shari’ah compliant finance a reality and how we can support that as a community. Or examining what are the steps we need to take, what questions should be being asked? Those are good approaches too.

    What I really really don’t like is the response which seems to say, see look how Islamic Finance is corrupt, see look how it is no different than conventional banking, see look at these scholars, they’re getting paid, etc etc. which seem then to lead to an attitude of either Islamic financing will never work and we should give up trying or we should all go ahead and engage in straight up riba since Islamic financing is just a scam.

    • Avatar

      Middle Ground

      July 15, 2010 at 4:26 PM

      Salam Bro,

      Totally agree with you there. For people who want to buy a house and avoid riba, a solution really needs to be found, rather than dismissing all efforts as scams.

      • Avatar

        Dilla

        July 15, 2010 at 6:01 PM

        Agree with Abu Noor and MG, people are too quick to dismiss, without even really knowing anything about Islamic banking (I mean its not that difficult to find out the business model of Islamic banks which some people commenting on here don’t seem to understand), and most of these people don’t have any solution to offer either.

        The reality for a lot of Muslims settling in the West is they are taking out interest bearing mortgages. If Islamic banking is an attempt to alleviate this then it is a benefit for the whole community to make it a system that is both halal and successful.

        A perfect system won’t be built overnight.

  12. Avatar

    Shahzad

    July 15, 2010 at 2:58 PM

    The key statement was:”It also gave ammunition to the many critics who see Islamic finance as an industry more driven by cultural identity than practical problem solving: as a hodgepodge of incoherent, incomplete, impractical and irrelevant ideas.”

    The statement applies not just to finance. Islamic thought and leadership these days is completely superficial and not confronting the real issues that effect this ummah in 21st Century. We’re happy in our masjids, in halaqas and wearing our nice thobes. But solid Islamic thought in the areas of society, politics and economics is completely under the mark. Islamic finance is nothing more than “Islamicized” greed. We want to make our money grow with the least guilt as possible.

  13. Avatar

    Asiya

    July 15, 2010 at 4:49 PM

    I think the part where they go Fatwa shopping is the scariest. In the Quran we were told of how the Jews and Christians took their rabbis and priests as rabbabiyeen (plural of Rabb – Lord, Cherisher, Sustainer). A sahabi asked how they took them as rababiyeen because they did not worship these priests and rabbis, so what did Allah ‘azzawajal mean by this? The Prophet salallahu ‘alaihi wa salaam said, Did they not take what they said to be haraam as haraam, and what they said to be made halal as halal? This is how they worshipped them.**

    This is indeed scary to see so-called “Islamic” banks to be acting in a very unIslamic way! Allahu musta’aan. May Allah ‘azzawajal grant us understanding of the religion.

    **I am paraphrasing the hadith. Please refer to the tafseer of ayah 31 of surat at Tawbah.

  14. Avatar

    abu Rumay-s.a.

    July 15, 2010 at 5:25 PM

    some resources that I’ve come across on the topic…

    http://www.muftitaqiusmani.com/IFBooks.aspx
    http://www.financeinislam.com/articles_list/2_36
    http://www.isdb.org/irj/portal/anonymous?NavigationTarget=navurl://96d97a5309160dc3af80a8b1744db35a

    Could one of the shuyookh recommend for us a list of qualified scholars to whom we (laymen) could refer to regarding these issues?

    Here are some names that I am familiar with??

    Dr. Abdulaziz bin Fawzan Al-Fawzan
    Dr. Yusuf bin Abdullah Al-Shubaili
    Dr. Mohammed Hashim Kamali
    Shaikh Taqi Usmani

  15. Avatar

    Saad

    July 15, 2010 at 6:49 PM

    Salam guys,

    I have been very confused with Islamic banking. I get the whole profit-sharing thing with the bank but what I don’t get is how the bank makes money in halal ways. To my understanding, most islamic banks (90%) use an instrument called ‘murabaha’ or mark-up purchase. This has always appeared very shady to me. To give you an example:

    If you want to buy a house on the market that costs $100k, you go to the islamic bank and they will say, okay: We will the buy the house for $100k but only if we can sell it immediately to you for $120k. Oh and don’t worry you can spread the $120k payment out over a bunch of years.

    Intellectually, I just don’t understand how something like this could be legal in Sharia’. It really seems like the sort of logic reformed Jews apply to get out of their own restrictions on Sabbath. It doesn’t make sense. I think the historical context where a lot of scholars permitted this transaction of mark-up purchase was when someone needed something from foreign lands. Given that it was risky transferring goods from one country to another, they would hire someone to buy a particular good for them from another country, transfer it and sell it to them. The mark-up price actually represented actual service, as in transport, risk and handling charges. In the case of a house I need to buy in the same city perhaps even next-doors, I really don’t see the difference between murabaha and riba (btw, same root).

    Another shady example is ‘tawaruq’ or reverse murabaha which is allowed by a lot of scholars. Here say someone desperatley needs some cash. He goes to person A and buys an object from him, say it’s a piece of metal for 120$ that he will pay back over five years. Then he goes to person B and sells the piece of metal for cash on the spot for 100$. Result is he has 100$ but owes someone 120$ over five years. This hanky panky was also used by Jewish scholars and at that Christians. I believe ibn Taymiya ruled it haram but that was a minority opinion.

    As an economist though, I really don’t see how islamic finance has any strong intellectual, or for that religious, basis. It seems like a thoroughly corrupt and hollow system. Or perhaps, I’m missing something if anyone would like to point that out. I think though the time has come for the scholars on this blog to write something cohesive because at this point I really don’t understand the logic.

    Salam all.

  16. Avatar

    Khan

    July 15, 2010 at 7:25 PM

    I do not think it is fair to put this article up without giving an alternative.

    Allahu alam.

    • Avatar

      Abu Aaliyah

      July 15, 2010 at 8:57 PM

      Asalaamu Alaikum,
      I do agree with you bro. but is there an alternative in U.S.? That is why we need Scholars of both the secular and Sharia’ to guide us in this regard.

      WaSalaam

      • Avatar

        Middle Ground

        July 15, 2010 at 11:39 PM

        Salam

        In the USA we have Guidance Financial, which is approved by Shiekh Taqi Usmani himself.

  17. Avatar

    abuabdirrahman

    July 16, 2010 at 12:30 AM

    Murabaha is a sharia compliant finance method, with which you can buy a local commodity, owned by the Bank. Under the Murabaha Loan Finance technique, the Bank buys and owns the commodities and cars requested by the customer, and then sells to the customer by installment at a PREFIXED profit margin.

    Tawarruq is a sharia compliant finance method, with which you can raise loan finance through buying installments in a local commodity, owned by the Bank. The applicant then authorizes the bank to sell his share in this commodity, on his behalf, to a third party for cash and then deposit the proceeds into his account.

  18. Avatar

    Muhammad Saeed Babar

    July 16, 2010 at 2:06 AM

    Thanks Dila for comment on my comments but I think you got the point as you said “It is only haram if the lending/investing is based on a contract which stipulates a guaranteed fixed return regardless of profit, i.e. interest. riba.” This is exactly what the Islamic banks are doing.

    Here is a very good article on the subject

    http://www.islamic-finance.com/item100_f.htm

  19. Avatar

    ishfaq

    July 17, 2010 at 11:50 AM

    Let me tell you that what goes on as Islamic Banking in Bangladesh is nothing but fraud in the name of God. For example, my organization used to keep FDR in an Islamic Bank because one of my Board member was also a Director in that bank. Now the Manger would put the profit (not interest)% at the back of the FDR and sign. How does he know, in advance, what profit he would make at the end of the year? What is the difference between what he promises as profit at the back of the FDR, versus what a commercial bank declares up front as interest? The difference is between transparency and deception, between honesty and cookery.

    In Bangladesh, I often see Islamic Banks giving notice of auctioning off property that was mortgaged to them against a loan – how come? They were supposed to have monitored the investment and share the profit or loss. They skim the profit but share no loss. In fact, they are just like others, in fact, worse. Islamic Bank here only does safe trading, short term loan with high interest. They do not reach the poor, what to speak of the ultra-poor.

    They have on their pay roll a bunch of Mullah, who are called for Board meeting, paid handsomely after the group photo is taken and they then certify, “All’s well”. What do they know where the depositor’s money is going or where from the money coming? In fact, there are lot of allegation of money laundering, dubious financing charges against these institutions. I for one stay away from them.

    Ishfaq

  20. Avatar

    Ibn Al-Rawandi

    July 17, 2010 at 1:36 PM

    The only reason there is ANY need for Islamic Finance is a result of Islam’s prohibition of interest. Without that, Islamic Finance would be indistinguishable from non-Islamic finance.

    There is nothing wrong with interest. If you wanna use a house that I OWN, you pay rent. If you wanna use a car that I OWN, you pay rent. Likewise, you want to use my OWN money, you pay rent. Interest is nothing more than rent on money and Islamic prohibition of rent is premised entirely on religious dogma. And we should all know now, in the 21st century, that religious dogma is never a good guide for sound decision making.

  21. Avatar

    sebkha

    July 17, 2010 at 11:18 PM

    Far greater minds than Ibn al-Rawandi’s recognized the inherent wrong in usury, centuries before the last Messenger (peace be upon him) was even born.

    The cultures of ancient Greece and Rome likewise denounced usury. Aristotle called it the most unnatural and unjust of all trades. Money, he said, was to be used for exchange, not the breeding of money from money. Plato condemned it on the grounds that it set one class against another and was therefore destructive to the state. In Rome Cicero, Cato and Seneca made similar censures.

    It sure has worked out well in Haiti, sub-Saharan Africa, etc. Kids die from vaccine-preventable diseases, have no access to schools or clean water, but by golly the First World gets to collect their debt interests.

  22. Avatar

    popt

    July 18, 2010 at 1:25 PM

    The Title should be changed.

  23. Avatar

    Ibn Hajr

    July 20, 2010 at 3:19 PM

    “To my understanding, most islamic banks (90%) use an instrument called ‘murabaha’ or mark-up purchase. This has always appeared very shady to me.”

    Think of wholesale vs retail. Is Walmart allowed to buy goods from China for $X and charge you $X+$1? That’s the concept of mark-up. Without it, there would be no retail or wholesale industry.

    Riba (interest) is forbidden in Islamic finance, but that doesn’t mean that the time value of money isn’t recognized. The sale price has to be stated upfront, though. You can’t charge someone $X + 5% until you pay for the item in full. Instead you agree to a sale price upfront which already takes into account the payment time frame. And you can’t increase the amount if the person takes longer to pay. That’s just a risk of doing business (as there are risks in all things).

    Do you think it’s fair that I give you a $1000 gold bar now, and you pay me back $1000 10 years from now? Hardly (unless I’m doing you a favor). We have to remove our biases from the equation and study Islamic finance from ulema that know what they’re talking about. Too many people assume no riba = no time value of money. Giving uninformed opinions on Islamic matters is not the way of the believer. If you don’t know, seek knowledge from someone who does. Don’t try and figure out why you “think” something seems shady to you.

    Money is a concept, an abstraction. Money should not be a means to make more money in and of itself. So I can’t lend you money and make money off of that transaction. I can, however, sell or rent something to you or invest with you and make money that way.

  24. Avatar

    fshareef

    July 20, 2010 at 3:47 PM

    Is anyone working on creating an actual Bank (physical or online [similar to ING]), based on Islamic values, in the United States? Not a financial institution, but an actual bank that has checking accounts, investments accounts, etc…?

  25. Avatar

    fshareef

    July 20, 2010 at 8:23 PM

    Does anyone know of any US based Muslim-owned Islamic Bank (like one that offers checking accounts, FDIC backed, etc), or know of anyone who is working on such a project?

  26. Avatar

    Muhammad Saeed Babar

    July 21, 2010 at 11:53 PM

    Assalam-O-Alaikum

    Thanks Ibn Hajr for elucidating what should be the “Islamic banking”. There is no prohibition to making money in Islam but one has to share the risk. By “slicing and dicing” Islamic banks absolve themselves from sharing the risk with the borrower. The practiced Murabaha transactions are very much akin to “temporary marriage” or “Halal Adultery” as in both cases the intention is quite different than what it should be. One can’t marry temporarily i-e marrying for a period and then divorce and similarly one can’t pre-arrange a mark up transaction and then call it a Murabaha.

  27. Avatar

    Habibi

    July 23, 2010 at 1:39 AM

    Assalamu Alaikum,

    Here are the 2 cents from someone who has actually worked in a So called No Interest house financing . Heard of LARIBA ? well, here’s the concept ( or at least was initially the concept ). Company and you purchase the house together. Each owns the % of house based on who puts what. Now , the company then find outs the rental in the neighborhood ( 3 quotes ) and assign you that rent. Over the period of time you pay that rent. A FIXED amount. Every month a portion of which goes towards the rent and portion of which goes towards buying the % of house, and over the period of time the portion of rent you are paying towards buying the % of house goes up ( sounds familiar ?). If the rent in the neighborhood is such that company would end up losing money , then no deal. My understanding of Islam says that there is no interest in islam. Either you give Qard Hasana , i.e. give someone loan with literally no expectation of getting it back or invest together ( i.e. sharing profit AND loss ) . Now in above model if you want to sell the house ( once you have more than 50% ownership ) , and house is selling at loss , both the company and yourself should share the loss , correct ? here comes the twist. In company’s many years history there wasn’t a loss recorded. Though in paper they show that they tried to find out the rentals in the neighborhood but there isn’t a real search for that ( at least I never saw one ) . Wait a sec, then how do they come up with the amount of rent ( read monthly payment s ) well , every morning the VP sends an email telling you about the rate from which you calculate that payment. Where does he get that % ? Fannie Mae or Freddie Mac, depending on who is financing the loan.
    Management criticizes other so-called islamically financed companies using different argument e.g Jews owners or Fatwa shopping or comments of such sort and you might have analyzed their model and respective implementation yourself.
    I am not sure about all this. Since we are supposed to go where there is no doubt or clarity is higher , as long as I can live without buying a house or investing in funds, I would rather remain on the safe side for risk of involving in riba is pretty scary.

    And surely Allah Knows Best .

    • Avatar

      Sarah J.

      July 23, 2010 at 5:46 AM

      This is disillusioning. In Bernard Lewis’s book on Islam, he favorably compares Islamic Mortgages with Western-Style Mortgages, including a little chart that shows everything you just described, only without the % increases. He seems to be/ to have been genuinely sanguine about the future of all Muslim countries under this sort of banking.

      Human beings have got to stop and listen for Shaitan’s whisper in their ears (in this case, “Who cares if it’s forbidden? Who’s going to notice the hidden interest-gathering?” I think we all know Who is going to notice. Nothing gets past Him.) before they do this sort of thing. He often slips in His whispers at the same time as God is speaking plainly to us through His writings, so that if we do not think first, we may put into practice everything we heard in that session of study, including the unwanted “footnotes.”

      • Avatar

        Mezba

        October 25, 2010 at 8:54 AM

        Five more questions about this rent to own thing.

        1. So who owns the house? Bank, homebuyer or both? If the bank owns a part then should they not share in the cost of utilities, insurance, property taxes etc.? Yet these costs are all borne out by the homebuyer. So why is the homebuyer paying “rent”? According to law these should be borne out by owners only in proportion to their ownership.

        2. If every year, more of the title goes to the homebuyer, then should not the Islamic bank pay the City of Toronto a Land Transfer Tax every year because every year the title is changing in composition?

        3. If a fire destroys the house after first year who collects the insurance money? (Again goes back to the first question: who is the owner).

        4. So what transaction is this? Is it a lease, a loan, a purchase? I thought uncertainties were NOT allowed in an Islamic transaction?

        5. Why does the Islamic bank re-evaluate the market price of the house every year to determine the rent? According to Ontario Law, rent can only grow by a fixed percentage every year. Yet suspiciously most Islamic financier’s reevaluation of the market price of the house to determine the “rent” is surprisingly close to Bank of Canada’s financing rates or the international LIBOR rate.

        I put some more questions about Islamic financing here: http://mezba.blogspot.com/2010/10/questions-about-islamic-financing.html but the above questions are relevant to this post.

  28. Avatar

    Rose Anderson

    September 24, 2010 at 3:43 AM

    Hi,
    As I see in your post there is lots of good information available on Islamic finance. Islamic finance has change a lot in the recent few years. Rest of the world specially American and European countries want to get advantage of these change in there own interest. Innovation of sukuk also one of the big reason that non Islamic countries look on the Islamic finance market.
    Sukuk is an alternate way of investment where the investor get the benefits of investment and its treated as rent on investment, to avoid the interest on investment which is strictly prohibited in Islam.I have also some site and blog ,I have write on same topic check my post : http://portfolioanalyst.blogspot.com/2010/09/islamic-debt-bond-market.html.
    I want to write on guest post for your blog based on change on the Islamic debt market.If you agree than contact me at roseanderson26@gmail.com

  29. Avatar

    GREEN BARRON

    February 25, 2011 at 3:58 AM

    Personally, I don’t think that Islamic Banking will sustain further future, IF there is no SIGNIFICANT DIFFERENCE between Conventional and Islamic Banking. They only change the terms into Arabic words, but apparently they still collect “RIBA'” in other way, @ by charging indirect charges to the people, whereby Islamic Finance principle forbidden Riba’.
    That’s what really happen in Islamic Banking nowadays.

    But if you have anything to share, I would certainly happy to discuss. Learning is important in life..

  30. Avatar

    Sabir

    March 29, 2011 at 2:32 AM

    Salam, This article is very useful 4 Muslims and non Muslims. It has many information about Islamic life, I Expect more from this author.

  31. Pingback: Halal Mortgages: Alleged Misuse of Taqi Usmani’s Fatwa and 3 Important Questions - MuslimMatters.org

  32. Avatar

    rb

    January 16, 2013 at 11:20 AM

    We bought a land two years back in a location we really liked and convenient for us. Since this was in a subdivision they said they have a right to buy it back if we don’t start building in 3 years.
    We already have a house and we want to do Islamic financing but none of the Islamic financing companies( Lariba, Guidance) do construction loans. Since the land is already bought and since we are planning a custom home, all builders can only do constructing loans. They are not ready to pay from their pockets or take loan by themselves (mostly due to not having money or bank not lending them any more money)

    The builders (and surprisingly one Islamic financing institution) asked us to go with construction loan and then change to Islamic financing after the house is build. We do not like the idea of paying interest during the 9-10 months building period. One builder said they will pay the interest during the construction but I am not very sure if this is a halal option for us. I would like to hear some opinions here

  33. Avatar

    Ushi

    January 8, 2014 at 4:14 PM

    I actually went through the process, for me it just one more way to make money.
    1. application fee $99.00 to 199.00
    2. Appraisal fee 300 to 650
    3. At the end is DENIAL or come up with 35k upfront
    Big Scam for me

  34. Avatar

    Robert Hannah

    September 27, 2014 at 12:00 PM

    As a financial analyst and having worked in some Islamic countries, I developed an interest in the foundations of Islamic finance. My conclusions are as follows:

    1. “Riba” is indeed banned in the Koran.

    2. There is a debate regarding the meaning of riba – does it mean “interest” or “excess interest” – that is, usury. The “consensus of Islamic scholars” (Ijma) is said to agree that all interest is riba and is banned. However, Al Azhar University (Cairo) issued a 2002 fatwa approving bank deposit interest, which resulted in considerable debate among scholars pro and con. Also, Yusuf Ali, author of a well known Koranic translation, translates riba as usury, not interest, and provides a discussion of the subject in his commentary (see Abdullah Yusuf Ali. The Holy Qur’an: Text, Translation and Commentary [Tahrike Tarsile Qur’an, 2nd ed., 1988] footnote #324.) Consequently, I do not see how one can claim that there is a consensus on the subject.

    3. There is little attempt by scholars to interpret the prophet’s prohibition on riba in in its context (it is often said that we should not focus on individual Koranic passages, but that one should interpret them in context). The context at the time of the prophet was one in which basic arithmetic was rudimentary or unknown, so that borrowers were easily cheated, lenders were unregulated, and debtors could be sold into indentured servitude (slavery). The prophet, being a social reformer, understandably wanted to remedy these social ills. Such elementary concepts as the time value of money, the risk free rate of interest, and risk premia, were unknown or not clearly defined. We now have a legal framework regulating limited liability, bankruptcy and usury, and an obviously imperfect but improving institutional and capital markets regulatory framework. I would conclude that prohibiting riba, casting out the money-lenders, and capping interest rates had their historical place, but have been superceded.

    Two American scholars of Islamic finance, Timur Kuran and Mahmoud Gamal, take a very dim view of the whole Islamic finance industry indeed, and their arguments ring true to me. A large part of their argument is that the promotion of Islamic finance is an assertion of cultural and ethnic identity and a rejection of western values. I would invite serious sudents of Islamic finance to google them and read their work.

  35. Avatar

    Ihaveanidea

    April 11, 2015 at 8:42 AM

    The price of car or house is obviously beyond the ability of a consumer earning monthly salary/would take 10 years or more to save full amount of just a car. The answer is to go to the source. Skip the market. If I want to buy a car, then go to the manufacturer, buy car directly using an agreement. Retail value is inflated value of car, need to find true value and then set up payment arrangements on that value. Enter a lease-to-buy agreement, pay car over time. There need not be a “profit” on buying a home. Government should be the one to sell me the home, not a bank. Deal directly with land owner, which is the Government. Lease-to-buy with no profit because there should be no middle-man seller.

  36. Avatar

    Donald

    May 12, 2016 at 4:28 PM

    While you say that conventional banking is 800 years old,Islam is more than 1400 years old. In those 1400 years how was banking practiced, what were some the largest banking institutions. Perhaps, banking, as we understand it today, was never practiced in those 1400 years of Islamic history.

  37. Avatar

    Abdul Razzak

    January 18, 2018 at 1:58 AM

    I am an Indian Muslim age 71. I have exhausted all my savings. Now I am left with my residence only where I live. To survive either have to sale residence. I am against riba and will pay zakah on sale proceeds every year. According to calculations I will finish the sale amount in 7 years. After that if I live I will have to bag and live on streets. One of my friends has suggested to go for reverse mortgage to a bank, which will enable me to live in my house as long as I live. Besides bank will pay me substantial sum for 20 years. Please kindly advise me what shall I do.

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#Life

Highly Educated, Willingly Domesticated

Laura El Alam

Published

on

Doctor.  Engineer.  Certified Nurse-Midwife. Writer and Literary Critic.  Lab Technician. Parliamentary Assistant. These highly-trained, respected careers are the culmination of years of intense study, training, and self-discipline.  Most people, upon achieving these esteemed positions, would happily dedicate the rest of their working years to putting their knowledge and expertise to use. They would gradually gain more experience, earn greater pay, and amass professional perks.  Most likely they would also, over time, assume leadership roles, earn awards, or become sought-after experts in their field.

What kind of person has all this at her fingertips, but decides to give it up?  Who would trade in years of grueling study and professional striving for an undervalued position that requires no degree whatsoever What type of professional would be willing to forgo a significant salary to instead work for free, indefinitely, with no chance whatsoever of a paycheck, recognition, benefits, or promotion?  

Who else, but a mother?  

While certainly not all mothers choose to give up their careers in order to raise their children, there is a subset of women who do. Stay-at-home-moms (SAHMs) may spend the majority of their days performing unglamorous tasks like washing dishes, changing diapers, and reading storybooks to squirming toddlers, but behind the humble job title are dynamic, educated, and capable women. They may currently have a burp cloth in one hand and a sippy cup in the other, but chances are, SAHMs have a mind and capabilities that reach far beyond the apparent scope of their household duties.  

What motivates a capable and ambitious woman to give up her career and stay home to raise children? Is she coerced into it, or does she choose it willingly? What is her driving force, if not money, status, or respect?  I had many questions for these women -my sisters in Islam and my stay-at-home “colleagues”- and some of their answers surprised me.  

For this article I interviewed seven highly-educated Muslim moms who chose to put successful careers on hold, at least temporarily, to raise their children. Between them, they hold PhDs, MDs, and Masters degrees. While the pervasive stereotype about Muslim women is that they are oppressed and backward, these high-achieving females are no anomaly. In fact, according to her article in USA Today, Dalia Mogahed points out that, “Muslim American women are among the most educated faith group in the country and outpace their male counterparts in higher education.”  Across the pond, The Guardian reports that more young Muslim women have been gaining degrees at British universities than Muslim men, even though they have been underrepresented for decades.”    

 

Ambitions and dreams

Every single one of the women I interviewed grew up in a household with parents who highly emphasized their daughters’ education. In fact, all of them were encouraged -either gently or more insistently- to pursue “top” careers in medicine, engineering, or science. Perhaps unsurprisingly, most of the women I interviewed were at the head of their classes at university.

In their school years, before marriage, all of the women I spoke with considered their career to be their main priority; motherhood seemed far-off and undefined. “When in uni,” explains Neveen, an endodontist who eventually put her career on hold to be a SAHM and homeschooler, “I never, ever thought I’d homeschool (nor did I believe in it), nor did I ever think I’d be a SAHM. I was very career-oriented. I was top of my class in dental school and in residency.”

“I absolutely thought I would be a career woman,” agrees Nicole, a mom of three in California who holds a Masters degree in Middle East Studies. “I never considered staying at home with the kids, because they were totally out of my mind frame at the time.”

“I expected that after graduation I would follow a research-based career,” adds Layla*, another SAHM in California who holds a PhD in Computer Engineering. “I never thought I’d stay at home because I believed it was fine for kids to be in daycare. I also thought SAHMs were losing their potential and missing out on so much they could otherwise accomplish in their lives.”

As young women, many assumed that if they ever chose to start a family, they would have assistants, nannies, or domestic helpers to lighten their load. Several of them believed they would put their future children, if any, in daycare. However, the reality of motherhood made each of these women change her mind.  

“My child was highly attached to me,” explains Sazida, an Assistant to a Member of Parliament in England, “and I could not envision him being looked after by anyone else despite generous offers from relatives.”  

“After I had my first child all I wanted to do was be able to care for her myself,” concurs Melissa, a Certified Nurse Midwife from New York.  

 

Other Motivations

It turns out that maternal instincts were not the only factor that made women choose to drop out of the workforce. Dedication to Islam played an enormous part in their decision-making.

“After having my first child,” explains Layla, “I decided that he was far more precious than working. He is a gift that Allah subḥānahu wa ta'āla (glorified and exalted be He) gave me to protect and care for.”

“After I became Muslim,” shares Nicole, “My goals changed, and I hoped to marry and have children. I do think it was beneficial for my children to have a parent always there to depend on,” she adds. “I feel like I was the anchor in the family for them, and I hope to continue that role.”

“What’s important to me,” asserts Neveen, “Is to raise my kids as good Muslims who love -and are proud of- their life and deen.”

Another reason many highly educated women choose to stay at home is because they have the opportunity to homeschool some or all of their children.  Remarkably, out of the seven women who answered questions for this article, five reported that they chose to homeschool at least one child for a few or more years.  

“I really enjoy my homeschooling journey with my kids and I get to know them better, alhamdullilah,” states Layla.

The opportunity to nurture, educate, and raise their children with love and Islamic values is the primary reason why these talented women were willing to put their successful careers on hold. “Hopefully Allah subḥānahu wa ta'āla (glorified and exalted be He) will reward us in Jannah,” muses Layla.

 

Challenges

Although none of the women I interviewed regrets her choice to be a SAHM, they all agree that it is a challenging job that is actually harder than their former career.  

One obstacle they must overcome is the negative perception others have about successful women who make the choice to put their career on hold.  “I soon learnt that casual clothes, a toddler, and a buggy don’t give you the same respect as suits and heels,” says Sazida.

One would expect, given their faith’s emphasis on the dignity of mothers, that Muslim SAHMs would enjoy the support of their family and friends.  Unfortunately, this is not always the case.

One mom explains, “My in-laws offered to look after my child, and my father-in-law couldn’t understand why I wanted to stay at home when there was perfectly good childcare that they were offering. After two and three years passed, he got more and more disheartened that I was not earning and complained about the lost potential income.”

“My non-Muslim mother told me that I wasting my education,” confides Nicole. “She did not support me staying home, though I think she appreciated that I was there for my children and have a good relationship with them.  She was a SAHM as well, so I am not sure where that was coming from, actually.”

Melissa’s mom was similarly skeptical of her daughter’s decision. “My mother didn’t love me being fully dependent on my husband,” she admits.  

“I was not at all supported by my family or friends,” laments Radhia, a Lab Technician with a BS in Microbiology with a Chemistry minor.

Other than being doubted and blamed for their choice, there are other challenges that SAHMs face. Accustomed to mental stimulation, exciting challenges, professional accomplishments, and adult interaction, many former career women find staying at home to raise youngsters to be monotonous and lonely. The nannies, assistants, cleaners, and other workers they had envisioned often never materialized, since hiring these helpers was usually too expensive. Husbands who spent the day working as the family’s sole breadwinner, were usually too tired to help with household duties.  A few women admitted that they felt guilty asking for help in the home when their husband was already exhausted from work. To exacerbate the problem, most of the women I interviewed lived far from family, so they could not rely on the help one normally gets from parents and siblings. That means the bulk of the childcare and housework fell onto their laps alone.  

“The main challenges for me,” states Nicole, “were boredom, and finding good friends to spend time with who had similar interests. I was also very stressed because the raising of the children, the housework, the food, and overall upkeep of our lives were my responsibility, and I found that to be a heavy burden.”

“I think the feelings of vulnerability and insecurity about whether I was a good enough mother and housewife was difficult,” shares Melissa. “All my sense of worth was wrapped up in the kids and home, and if something went wrong I felt like a failure.”

“It was not as easy as I thought it would be,” confesses Radhia. “It was overwhelming at times, and I did miss working. Emotionally and physically, it was very draining.”

“Staying home has been harder than I expected,” adds Summer*, a Writer and Literary Critic from Boston. “I didn’t realize how willful children could be. I thought they’d just do what I said. I’m still trying to get used to the individuality! It’s harder than my job was, only because of the emotional load, and the fact that the effort you put in doesn’t guarantee the results you hope for.”

 

Money Matters

Giving up their salary also put women in a state of financial dependency, which can be a bitter pill to swallow for women who are used to having their own resources.  

“I felt very dependent on my husband, financially,” says Radhia.

“Alhamdulillah, my husband does not refuse if I ask him to buy anything,” explains Layla. “However, I felt like I was losing my power of deciding to buy something for someone else. For example, if I want to buy a gift for my mother or my sister, he never refuses when I ask him, but still I feel internally it is harder for me.”

“Alhamdulillah my husband’s personality is not one that would control my financial decisions/spending,” shares Neveen. “Otherwise I would never have chosen to be a SAHM.”

“Giving up my career limited my power to make financial decisions,” asserts Summer. “I could still spend what I wanted, but I had to ask permission, because my husband knew when ‘we’ were getting paid, and how much. He paid the bills, which I didn’t even look at.”

“Asking permission,” Summer adds, “is very annoying.”

Re-entering the workforce was difficult for some women, while not for others.  The total time spent at home generally affected whether women could easily jump back into their profession, or not.  Some of the moms felt their skills had not gotten rusty at all during their hiatus at home, while others felt it was nearly impossible to make up, professionally, for missed time.  

 

Words of Wisdom

Although all of the women I interviewed firmly believe that their time at home with their children is well-spent, they do have advice for their sisters who are currently SAHMs, or considering the position.  

“If I could go back and speak to myself as a new mum, I would tell myself to chill the heck out and just enjoy being a new mum,” says Sazida.

Melissa offers, “I wish people understood how talented you have to be to run a home successfully. It’s a ton of work and it requires you to be able to do everything from snuggle and nurture, to manage the money, budget, plan precisely, be a good hostess, handle problems around the home, manage time, and meet goals all while trying to look cute.

“I would always recommend that women have their own bank account and money on the side,” advises Nicole. “You never know when you are going to need it.”

“Once their kids are in school,” adds Radhia, “I would suggest SAHMs start something from home, or take on part time work, or courses, if necessary.”

“For moms choosing to stay at home,” Layla suggests, “I would say try to work part-time if your time permits, and if you have a passion for working. Trust that Allah subḥānahu wa ta'āla (glorified and exalted be He) will protect you, no matter what. Remember, you are investing in your kids, and that is far more important than thinking ‘I need to keep money in my pocket.’”

 

Support, don’t judge

As a Muslim ummah, our job is to support one another as brothers and sisters.  It seems people forget this oftentimes, and erroneously believe that we are entitled to gossip, speculate, and sit in judgement of each other, instead.  In our lives we will all undoubtedly encounter women who choose to continue their careers, and those who put them on hold, and those who decide to give them up completely. Before we dare draw conclusions about anyone, we must keep in mind that only Allah subḥānahu wa ta'āla (glorified and exalted be He) knows a person’s entire story, her motivations, and her intentions. Only He subḥānahu wa ta'āla (glorified and exalted be He) is allowed to judge.  

We must also remember that some women, for a variety of reasons, do not have the luxury of choosing to stay at home. They must work to the pay the bills. Allah subḥānahu wa ta'āla (glorified and exalted be He) knows their intentions and will reward their sacrifices as well.

 

It is my hope that this article will not cause more division amongst us, but rather raise awareness of the beautiful sacrifices that many talented and intelligent women willingly make for the sake of their children, and even more so, for the sake of Allah subḥānahu wa ta'āla (glorified and exalted be He).  They are the unsung heroes of our ummah, performing an undervalued job that is actually of utmost importance to the future of the world.

 

*Name has been changed

 

 

For the past decade, writer Laura El Alam has been a regular contributor to SISTERS Magazine, Al Jumuah, and About Islam. Her articles frequently tackle issues like Muslim American identity, women’s rights in Islam, support of converts/reverts, and racism. A graduate of Grinnell College, she currently lives in Massachusetts with her husband and five children. Laura recently started a Facebook page, The Common Sense Convert, to support Muslim women, particularly those who are new to the deen.

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OpEd: Breaking Leases Into Pieces

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Ali ibn Talib raḍyAllāhu 'anhu (may Allāh be pleased with him)once said, “Know the truth and you’ll know who’s speaking the truth.” 

I am based in Canada and was recently having coffee with friends. In the course of the conversation, a friend (who I consider knowledgeable) said that it’s okay to pay interest on a leased car because interest doesn’t apply to lease contracts. This completely caught me off guard, because it made no logical sense that interest would become halal based solely on the nature of the contract.

I asked him how this can be true and his response was that the lease contract is signed with the dealer and the interest transaction is between the dealer and the financing company so it has nothing to do with the buyer. Again, this baffled me because I regularly lease cars and this is an incorrect statement: The lease agreement is signed with a third party financing company who is charging you directly for the interest they pay the car dealership. Therefore, any lease contract that has interest associated with it is haram. This is the same as saying your landlord can charge you interest for his mortgage on a rental contract and this would make it halal. I tried to argue this case and explain to my friend that what he was saying was found on false assumptions and one should seriously look into this matter before treating riba in such a light manner.

Upon going home that night, I pulled out all my lease contracts (negotiated to 0% mind you) and sent them over to my friend. They clearly showed that a bill of sale is signed with the dealer, which is an initial commitment to purchase but the actual lease agreement is signed with a third party financing company which is charging you interest directly. If this interest rate is anything above zero it is haram (anything which is haram in a large quantity is also haram in a small quantity).

To my dismay, instead of acknowledging his mistake, my friend played the “Fatwa Card” and sent me a fatwa from a very large fatwa body in North America, which was also basing their argument on this false assumption. Fortunately for me, my friend pointed out the hotline number and the day and time the mufti who gave the fatwa would be available to answer questions.

I got in touch with the scholar and over a series of text messages proceeded to explain to him that his fatwa was based on a wrong assumption and for this reason people would be misled into leasing cars on interest and signing agreements with financing companies which are haram.
He was nice enough to hear my arguments, but still insisted that “maybe things were different in Canada.” Again this disappointed me because giving fatwa is a big responsibility – by saying “maybe” he was implying that full research has not been done and a blanket fatwa has been given for all of North America.

It also meant that if my point was true (for both Canada and the United States) dozens of Muslims maybe engaging in riba due to this fatwa.

The next week I proceeded to call two large dealerships (Honda and Toyota) in the very city where the Fatwa body is registered in the US and asked them about paperwork related to leasing. They both confirmed that when leasing a new vehicle, the lease contract is signed with a third party financing company which has the lien on the vehicle and the dealer is acting on the financing company’s behalf.

It is only when a vehicle is purchased in cash that a contract is signed with the dealer. This proved my point that both in the US and Canada car lease contracts are signed with the financing company and the interest obligations are directly with the consumer, therefore if the interest rate is anything above 0% it is haram. I sent a final text to the mufti and my friend sharing what I had found and letting him know that it was now between them and Allah.

1. As we will stand in front of Allah alone on Yaum al Qiyamah, in many ways we also stand alone in dunya. You would think that world renowned scholars and an entire institution would be basing their fatwas on fact-checked assumptions but this is not the case. You would also think that friends who you deem knowledgable and you trust would also use logic and critical thinking, but many times judgment is clouded for reasons unbeknownst to us. We must not take things at face value. We must do our research and get to the bottom of the truth. Allah subḥānahu wa ta'āla (glorified and exalted be He) says to stand up for truth and justice even if it be against our ourselves; although it is difficult to do so in front of friends and scholars who you respect, it is the only way.

2. There are too many discussions, debates and arguments that never reach closure or get resolved. It is important to follow up with each other on proofs and facts to bring things to closure, otherwise our deen will slowly be reduced to a swath of grey areas. Alhamdulillah, I now know enough about this subject to provide a 360 degree view and can share this with others. It is critical to bring these discussions to a close whether the result is for you or against you.

3. Many times we have a very pessimistic and half hearted view towards access to information. When I was calling the dealerships from Canada in the US,  part of me said: Why would these guys give me the information? But if you say Bismillah and have your intentions in the right place Allah makes the path easy. One of the sales managers said “I can see you’re calling from Toronto, are you sure you have the right place?” I replied, “I need the information and if you can’t give it to me I don’t mind hanging up.” He was nice enough to provide me with the detailed process and paperwork that goes into leasing a car.

Finally, I haven’t mentioned any names in this opinion and I want to make clear that I am not doubting the intentions of those who I spoke to; I still respect and admire them greatly in their other works. We have to be able to separate individual cases and actions from the overall person.

May Allah subḥānahu wa ta'āla (glorified and exalted be He) guide us to the truth and rid of us any weaknesses or arrogance during the process.

Aameen.

Ed’s Note: The writer is not a religious scholar and is offering his opinion based on his research on leasing contracts in North America.

Suggested reading:

Muslim’s Guide to Debt and Money Management Part 6

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