Islamic finance

Speculation abounds over the £38,000 stashed in the basement of the house belonging to a Muslim family which was raided by police in Forest Gate recently. There is a great deal of interest in the family's explanation for keeping so much cash at home - the laws of Islamic finance.

Put simply, Shariah Islamic law does not allow followers to make money from money. This means they cannot earn interest and so paying money into ordinary banks is not possible, although most banks pay so little interest anyway they may as well be running Islamic accounts.

Muslims must create wealth only through legitimate trade and investment in assets. Money can be used to buy good or services which can then be sold for a profit. Investment can be tricky too - putting cash into companies involved with alcohol, pork products, gambling, tobacco, pornography and anything else deemed unethical or unlawful is strictly prohibited.

The Islamic financial model works on the basis of risk sharing. The customer and the bank agree terms and divide both the risk and any profits between them. The main categories within Islamic finance are:

Ijara - a leasing agreement whereby the bank buys an item on behalf of customer and then leases it to the customer over a specific period.

Ijara-wa-iqtina - a similar arrangement, except that the customer is able to buy the item at the end of the contract.

Mudaraba - which offers specialist investment by a financial expert where the bank and the customer share any profits. Customers risks losing their money if the investment is unsuccessful, although the bank will not charge a handling fee unless it turns a profit.

Murabaha - a form of credit which enables customers to make a purchase without having to take out an interest bearing loan. The bank buys an item and then sells it on to the customer on a deferred basis.

Musharaka - a investment partnership in which profit sharing terms are agreed in advance, and losses are pegged to the amount invested.

Today, more than two hundred and fifty Islamic financial institutions are operating world-wide and Islamic banking is estimated to be managing funds to the tune of £300 billion. Islamic bankers keep pace with sophisticated techniques and latest developments and have evolved investment instruments that are not only profitable but are also ethically motivated. Because of this, Islamic banking continues to grow at a rapid pace and its value-orientated ethos enables it to attract business from Muslims and non-Muslims alike - its clientele are not confined to Muslim countries but are spread over Europe, United States of America and the Far East.

HSBC launched Shariah-compliant mortgages in Britain in 2003. The UK's first Islamic bank - the Islamic Bank of Britain - opened in September 2004 on London's Edgware Road and more branches have appeared around the country since then. It offers the same types of products you would expect to find in any high street bank: Shariah-compliant versions of current accounts, loans, mortgages, credit and charge cards and business banking services.

But with two million Muslims living in the UK, it was clear that other banks would want a slice of the business. A handful - including some of the biggest international names and the Middle East's biggest traditional banks - also offer financial products in the UK tailored for Muslims. West Bromwich Building Society offers Shariah-compliant mortgages and Children's Mutual provides the UK's only Shariah-compliant Child Trust Fund.

Earlier this month, Lloyds TSB took its Shariah-compliant current accounts and mortgages nationwide across its 2000 branches. Previously, they had limited availability. In common with other banks, the products will of course be available to non-Muslims. The bank says it will expand its product range and planned to launch an Islamic student current account in time for the new academic year.

Speaking at the Islamic Finance and Trade Conference this month Chancellor Gordon Brown called for the UK to become a centre of Islamic finance - 'the gateway for Islamic finance'. Tax reforms are expected to make Shariah-compliance easier. The Chancellor's comments are no surprise given the huge interest in Islamic finance at the recent World Economic Forum in Sharm al-Sheikh in Egypt. One of Germany's biggest banks, Deutsche Bank, announced a joint venture with Ithmaar Bank of Bahrain and Abraaj Capital of Dubai to launch a £1bn Shariah-compliant financial fund. And many bankers at the Forum were upbeat about a growing success story of banking services which they argue are a fairer and more ethical way to handle financial affairs.

And so back to the beginning and the family in Forest Gate. Humeya Kalam, sister of the two men arrested and then released without charge said that hours after her brothers were arrested she told police they would find the money in a suitcase. 'My mother has never felt it right to keep this money in a bank account or to hold savings in a bank,' she said. She is not alone. Just last month it did not take long for a thief posing as a water board official to find the £50,000 cash savings of an 79-year-old non-Muslim woman from Bath.

In Miss Kalam's situation, she explained the savings were mostly rent money from a family living in a house she owned next door to their home. Her brothers put some of their wages in the case each month and said it was 'neither sinister nor unexplained'. In the wake of so much publicity I am sure they will prefer the safety of an Islamic bank account now.
Yes under Islamic Law, making interest on money is a sin, blowing yourself up surrounded by innocent commuters on the other hand will get you to heaven. We all know these two clowns are up to their necks in fundamentalism, if I was a suspicious type, I'd say they were working with whoever bubbled them to the police.

You've just got to look at the reaction of the local "peaceful" Islamic community to the incident. Yet another subtle example of their Jihad by guile.
Warrior-Poet: go play on some train tracks.

Forces Sweetheart: That's a usefull thing to post. I now understand how islamic accounts work, but how do islamic mortgages work? You don't make money on a mortgage, so do they not pay interest either?

If so, I feel a change of faith coming on. :D
Tiffy wrote:

If so, I feel a change of faith coming on.

You'd make a good Muslim Tiffy, no one like you either!
^ your racism shows no bounds WP...
I would not bother. I was talking to a banking friend of mine who tells me that Muslim mortgages require a HUGE initial outlay, as do other financial arrangements.
Edited by me, don't want Stabtiffy to call me a chopper again do I?
devlish wrote:

^ your racism shows no bounds WP...

Really? and I thought it was humour.... Even liberals understand humour surely?

Beside which Islam is not a race but a religion therefore by definition any criticism against it cannot be racist. The term used in the metropolitian set is Islamophobia I believe, which is strange, for it indicates that there is indeed something to fear from Islam.....
Don't ruin the thread. This is for Islamic Finance information and questions. If you need to discuss the same argument, again, do it in the correct forum.
Humour maybe, but veiled racism non the less. If it's not muslims your having a go at then it's jocks and if it's not jocks then it would be septics, you really are the stereotypical englander are'nt you?
On the contrary, I have never instigated any anti Jock threads, merely responded to anti english comments made in said threads, as for the septics, I don't think I've managed to insult them much if at all.

I don't use veiled racism, You may call me racist as is your left wing perogative but those who know me merely call me honest. The real racists are those that patronise minorities and treat them differently. I on the other hand treat everyone equally, with no special favours and if I do happen to take the p*ss out of a mate who happens to be non white, then it is done out of affection, not abuse. Just like I will accept genuine banter in the spirit it is given.

It is not people like me that cause resentment against minorities devlish, it is people like you who would stifle criticism of an untenable policy.

As for your remarks about me being a stereotypical Englander, seems a bit racist to me.

As for Tiffys above remarks, fair one mate, I apologise for interrupting this popular thread!
I'm far from left wing WP, slightly right of center I'd say. If your critisism wasn't so widely sweeping then we'd probably agree to a lot of the issue you raise and/or contribute to but it is just that, widely sweeping statements tarring a whole race/religion/nation as opposed to the minorities within those races/religions/nations.

Other than that the rest of what you say is reduntant in the face of your previous outbursts.
Well I can't help being from the Mini Gun school of diplomacy devilish!! As for tarring a whole religion with my criticism, they condemn themselves by their own words and actions and more tellingly, by their silence.

I'm perfectly willing to get into a sensible discussion with anyone regarding my beliefs and why I feel like I do, I'm even willing to compromise and admit I'm wrong at times, but I will never my freedom to speak out against the injustices being done to my people. Just consider me a white Nelson Mandela!
StabTiffy2B said:
... but how do islamic mortgages work? You don't make money on a mortgage, so do they not pay interest either?

If so, I feel a change of faith coming on. :D
There was an article in the Sunday Times about Sharia-compliant financial products this weekend. I had the same thought as you (i.e. are they cheaper?) but it would appear not.

From the BBC website:

"The property is then purchased by the financier, who takes its legal title.

The property is then sold on to the customer at the original price, with payment spread over an agreed period of time.

During that time, the customer also pays the financier rent for the use of the property. Once the agreed period of time has elapsed, ownership of the property is transferred to the customer. "

It appears to me that they are no cheaper - you pay 'rent' instead of interest as well as repaying the original capital.

You can read the Sunday Times article here:

"When it comes to home finance, Lloyds’ lowest Islamic mortgage charges are equivalent to an interest rate of 5.18%, or repayments of £595 on a £100,000 loan. An HSBC Amanah mortgage for £90,000, meanwhile, would cost about £570 a month.

Sherrin said: “Rates on Islamic mortgages are comparable with those on standard loans, although it is difficult for us to compete with sort-term deals.” "

At the end of the day, the banks are not in this for charity - they still need to make a profit, they just dress it up in a different way!
Thanks Doomsayer. I didn't think there would be a way of getting out of paying interest. Always worth a try though.

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