عدد الرسائل : 2061
العمر : 34
Localisation : المملكة العربية السعودية
تاريخ التسجيل : 11/05/2007
|موضوع: Islamic Banking - A need for Broader Understanding الأربعاء 30 يناير - 20:08|| |
Islamic Banking - A need for Broader Understanding
By Adil Ahmed Shariff
Islamic Banking has been a very hot topic of discussion nowadays-some praising it, some criticizing it and some out-rightly rejecting it. But, what is the reality? The broad aspect of how Islamic Banking is judged and analyzed is in terms of its comparison with conventional banking. But, before making a meaningful comparison what one needs to understand primarily is that “it is the SUBSTANCE (Process) and NOT the FORM (Net Result) through which a transaction is undertaken is the key factor, which eventually would tune a particular transaction to be Shariah compliant or otherwise. In the following paragraphs accordingly, an attempt has been made to highlight some of the core issues (criticism points) that Islamic banks are currently faced with:
SUBSTANCE versus FORM:
Let us take a very simple example: A person being in financial difficulties, needs some urgent money (say PKR 1,000/-) to entertain some of his guests. He approaches one of his friends and tells him about his requirement and also intimates that he would be able to return the money in a week’s time. His friend says OK, I am ready to loan you this amount but I would take back PKR 1,100/- (rather the same amount) against this financing. In other words, he is charging PKR 100, 10% over and above the principal, in the context of getting his money back not on spot basis but rather after seven days. There is accordingly no Asset creation (core element of Islamic financing mode) in this transaction but rather money over money, therefore this over and above amount (PKR 100) is Interest (RIBA).
Simultaneously, suppose another friend of him also agrees to grant him financial assistance but instead of giving him straight the required amount enables him to purchase the required items to entertain his guests and then sells these items to him for PKR 1,100/- (sale price to be settled on deferred basis, say 1 week). Now, this PKR 100 (1,100 less 1,000/-) is against the items sold (Asset creation) which in essence makes this transaction Profit oriented (cost plus transaction), and not Interest (RIBA) based as explained above.
In both the above situations, the Form is the same – earning a certain amount above the principal. But, it is the SUBSTANCE which underlines the difference of PURITY– HALAL OR HARAM.
(I must emphasize here there are also other factors (existence, ownership, physical / constructive possession, identification of subject matter, certainty of price) which all stand equal to be satisfied, but the CRUX remains the same – SUBSTANCE over FORM.
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