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FINANCIAL CHRONICLE™ » DAILY CHRONICLE™ » Britain to become first non-Muslim country to launch sharia bond

Britain to become first non-Muslim country to launch sharia bond

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smallville


Associate Director - Equity Analytics
Associate Director - Equity Analytics
I thought, for Muslims - taking interest is haram (prohibited). So how if so banks like Amana comes up?
How Muslims invest in FDs? and stock market as its also giving interests, returns?
Just thinkn whether the original concepts were changed to cater this market too??

scratch 

Zaiban


Senior Equity Analytic
Senior Equity Analytic
there is some sri lankan guy in FB who gives links to stuff on islamic finance and stuff... check it out... maybe it may help... scroll down i saw some stuff on islamic finance on the page...

https://www.facebook.com/noor.consultants

Chinwi


Associate Director - Equity Analytics
Associate Director - Equity Analytics
@smallville wrote:I thought, for Muslims - taking interest is haram (prohibited). So how if so banks like Amana comes up?
How Muslims invest in FDs? and stock market as its also giving interests, returns?
Just thinkn whether the original concepts were changed to cater this market too??

scratch 
They  use profit sharing concept and convert the procedures accordingly.


For eg. If you lease a vehicle using normal banking they pay cash behalf of you and charge installments with interest. 
Amana cannot charge you interest like that . 
Instead , they  buy your selected vehicle for them (to the bank)  and then hire it to you for your use. You pay hire charges monthly to the bank.  Hiring charges includes overheads and profit portion to the bank and to the depositors. At the end of the term they 'gift' the vehicle to you. 


Depositors get pre agreed portions of profit from the business .
 
eg. say for 3 month deposit , Depositor gets 60% and bank get  40 % of the profit. (60:40) 
 1 year deposit  D:B = 70 : 30
3 years D:B = 85 : 15 ........  like that.
 ( above may not actual ratios) 


Profit sharing Ratios change according to time period of the deposit and with other various conditions. 


Hence, the IT people are the ones who fall in deep trouble when they develop and run the systems. Corrections, cross flows and changes are endless. Understanding the system (Sys Ana) is very difficult because there are many flows and components than in normal banking system. Most are hidden and emerge months after launching the system in the real world.

yellow knife


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
I think this is a topic worth discussing continuously to get a good understanding of the Islamic Fianance

Interest is different from profit even though some believe its the same at a glance.

Suppose your mother is sick and you need money to admit her to a private hospital. You dont have money. So you have to borrow it from some one else. Remember you dont make a profit out of this loan. Thus the loan taker has to charge you interest. But according to islamic finance this is not a loan that you can share profit.

Suppose you get a loan to buy mobile phones at rs 30 and sell at rs 90. That creates a profit. So you can share that with the financier.

thus the purpose of loan is important to decide the profit.

Accordingly you cant charge a profit share for a loan of a car that you take for your personal usage. but if the same car is used for hiring out you make profits and that can be shared.


Depositors come to share profit as well as losses. If a financial intermediary is making losses no one will come to bear losses. thus it prevent from financiers to make wrong calculations and take unnecessary risk.

Baharain had conventioanl banks and no Islamic bank. then Islamic Bank of Baharain was incorporated. It made losses. No one wants to deposit their hard earned money and bear losses unless he is a lunatic. So National Bank of Baharain came and bailed out Islamic Bank of Baharain.

This is lesson for our Central Bank as well. Every finance company is trying to put up something in the name of Islamic Fiancne. and if there are no conventional banks Islamic Finance can not survive .

UKboy


Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@Rapaport wrote:Well UK has realised where most money is and heading towards it!
That is very much likely the reason behind this. They would say ok to bonds but not the main course of Sharia law.

smallville

smallville
Associate Director - Equity Analytics
Associate Director - Equity Analytics
@yellow knife wrote:

Suppose your mother is sick and you need money to admit her to a private hospital. You dont have money. So you have to borrow it from some one else. Remember you dont make a profit out of this loan. Thus the loan taker has to charge you interest. But according to islamic finance this is not a loan that you can share  profit.

Your example took my memory to 2004 where a friend of mine shared with me his experience working as an insurance agent in Duabi.

In Dubai, ALICO (American Life Insurance) was a big company selling insurance policies. There were natives, Indians, Philippines, SLs and many others.. in 2004 (as I remember), so this friend of mine had approached a Muslim gent and had explained the benefits of having an insurance.. Few of them being;

1) Getting a life cover and money for the family in case of death of the insurer
2) Look after his family in case of death of the insurer
3) A return (an interest) for the investment on maturity as an added benefit to the life cover.

This Muslim gent, as many others was a faithful one to God. So he had rejected having interest saying 'its haraam in my religion' then when my friend was explaining him the points 1 & 2, and was asking questions like;
What will happen to ur family if u suddenly die?
Who will provide them food and shelter?
What will happen to your kids education?
etc...

This gent had calmly stated that in case of his death, his family will be looked after by God. and God will take care of their needs.

My friend, together with an experienced colleague of him never succeeded in convincing this musalman to go for insurance.

But in Dubai, every vehicle must be insured as a rule so for vehicle insurance its not a problem...
So I wonder how they sell Vehicle insurance. Telling something like "to cover damages done by ur vehicle to other vehicles, lives, property, etc.. would even raise the question as if God is doing everything nobody would require these things scratch As Chinwi mentioned, if profit sharing is the concept, then how would insuring a vehicle make you profit?

This is just for discussion and not for any racial or any kind of discrimination against any religion or race..

Jiggysaurus

Jiggysaurus
Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@smallville wrote:

In Dubai, ALICO (American Life Insurance) was a big company selling insurance policies. There were natives, Indians, Philippines, SLs and many others.. in 2004 (as I remember), so this friend of mine had approached a Muslim gent and had explained the benefits of having an insurance.. Few of them being;

1) Getting a life cover and money for the family in case of death of the insurer
2) Look after his family in case of death of the insurer
3) A return (an interest) for the investment on maturity as an added benefit to the life cover.

This Muslim gent, as many others was a faithful one to God. So he had rejected having interest saying 'its haraam in my religion' then when my friend was explaining him the points 1 & 2, and was asking questions like;
What will happen to ur family if u suddenly die?
Who will provide them food and shelter?
What will happen to your kids education?
etc...

This gent had calmly stated that in case of his death, his family will be looked after by God. and God will take care of their needs.

This is just for discussion and not for any racial or any kind of discrimination against any religion or race..
These are all stone age cult beliefs and cult systems. Stone age people crapping in the desert and trading camels for slaves and women don't know the concept of INFLATION, therefore the god/gods created by such people are also unaware of the concept of INFLATION.

Members of the said cult may come up with convulated explanations and how they are god fearing people but the real explanation is obvious in hindsight.

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