There are concerns that the development of Islamic banking and Finance is more in line with its counterpart than indigenous Islamic. Islamic Finance is different than its counterpart on many fronts like interest, risk ,halal, haram, bankruptcy to name few. Here is an excerpt from an article that pointedly said that Islamic Banking and Finance is not Islamic anymore.
"The credit crunch has sponsored much discussion on the need for a new approach to banking and finance. While the Islamic financial system has been mentioned as a possible alternative in this regard, it is widely recognized that this system has itself been largely modeled on its interest-based counterpart. Both share the same material goals and adopt the same institutional structures, with the result that the products promoted by the Islamic finance industry are often indistinguishable from those of interest-based institutions."
"These similarities have led some insiders to concede that the Islamic banking and finance industry has failed to properly implement the ideals upon which it was founded more than thirty years ago. They fear that a gradual merger between Islamic and interest-based finance is taking place, encouraged by commercial and political factors. Others wonder how such a vital function of Muslim society can be founded upon contractual devices that so many of its scholars reject, the enforceability of a promise being a particularly widespread case in point."
"A serious and nimble response to these concerns is often hindered by a lack of intellectual honesty within the Islamic finance industry itself. Platforms are rarely provided to scholars who wish to take one step back and question some of the fundamental concepts that are being applied. Few questions are raised regarding the validity of Islamic debt financing, limited liability structures, speculative methods of market trading, or the nature of the monetary system. Such matters are given little attention in the headlong rush to copy interest-based methodologies and this has resulted in a number of embarrassing paradoxes. For example, while some Islamic investment managers attempt to develop Shari`ah compliant short-selling techniques, several western authorities are banning the practice on account of the instability that it causes. Most serious of all is the fact that, having copied the western template of finance, the Muslim world is in no position to point to a viable alternative at this time of crisis. In a few short months, thirty years of strategy have been debunked, and our industry leaders are left with little to say."
Aya 280 of Sura Al-Baqara
Aya 280 of Sura Al-Baqara
Ayat 275 to 279 of Sura Al-Baqara
Aya 65 of Sura Al-Baqara
Aya 163 of Sura Al-A'raf
Don't put a question mark where, Allah puts a full stop.
"According to dictionary, the word Islam, from the tri literal root s-l-m, is derived from the Arabic verb Aslama, which means "to accept, surrender or submit. “ A Muslim (Arabic: مسلم ) an adherent of the religion of Islam. The feminine form of 'Muslim' is Muslimah (Arabic: مسلمة ). Literally, the word means "one who submits to God".
“If anyone is looking for a religion other than Islam, then let it be known that it will not be accepted from him; and in the Hereafter he will be among the losers.” (Sura Al’i-Imran Aya No. 85)." Dīn (دين, also anglicized as Deen) is an Arabic word usually translated as "religion" but also as "way of life", especially referring to Islam, known as ad-dīn "the deen", or dīn al-haqq "the true deen" (e.g. ayat 48:27, 9:33 = 61:9). It is, however, not exclusive to Islam, as Arab Christians also use it to refer to their religion and religion in general. The word “Deen” appears in as many as 79 Qur'anic verses and it is often translated as religion for convenience since there is no equivalent single satisfactory English word. In the Qur'an, Islam is always referred to as Dīn. It is the sum total of a Muslim's faith and the code and conduct necessary to submit to Allah's laws.
Hence, it can be said that Islamic Finance is conducting financial and business matters according to the commandments of Allah(SWT) expressed or implied.
Credit transactions are not to be taken as a routine matter as in business no one has enough capital to give time to debtor till they are able to pay the amount and nor can everyone write them off as charity even if it is the best and it is the best because Allah(SWT) has said so. Therefore, there is no concept of banking in Islam where the business model is borrowing and subsequent lending.
Credit transactions are injurious to Muslims on two accounts. As a creditor, on account of giving respite to debtor in difficulty, disturbance in cash flows leading to default in payment in case of back to back Murabahah and seemingly loss of capital in case of write off to charity. As a debtor, there is no exemption from payment of debt unless it is written off by creditor. His heirs are liable to pay the debt. I quote Ahadith in this connection.
Shaih Muslim 872
Narrated Amr ibn al-'As "The Messenger of Allah (peace be upon him) said: All the sins of a Shahid (martyr) are forgiven except debt."
Al-Tirmidhi
Narrated AbuHurayrah "The Prophet (peace be upon him) said: The soul of a deceased believer is held back on account of his debt till the debt is discharged."
Another very important Hadith on debt based transaction is
Sahih Al-Bukhari 1.795
"Narrated Aisha (the wife of the Prophet) Allah's Apostle used to invoke Allah in the prayer saying "Allahumma inni a'udhu bika min adhabil-qabri, waa'udhu bika min fitnatil-masihid-dajjal, wa a'udhu bika min fitnatil-mahya wa fitnatil-mamati. Allahumma inni a'udhu bika minal-mathami wal-maghrami. (O Allah, I seek refuge with You from the punishment of the grave and from the afflictions of Masiah Ad-Dajjal and from the afflictions of life and death. O Allah, I seek refuge with You from the sins and from being in debt)." Somebody said to him, "Why do you so frequently seek refuge with Allah from being in debt?" The Prophet replied, "A person in debt tells lies whenever he speaks, and breaks promises whenever he makes (them)." 'Aisha also narrated: I heard Allah's Apostle in his prayer seeking refuge with Allah from the afflictions of Ad-Dajjal."
The following sentence from the above Hadith is of particular importance to Muslims "A person in debt tells lies whenever he speaks, and breaks promises whenever he makes (them)." So, there is every possibility of default.
“If anyone is looking for a religion other than Islam, then let it be known that it will not be accepted from him; and in the Hereafter he will be among the losers.” (Sura Al’i-Imran Aya No. 85)." Dīn (دين, also anglicized as Deen) is an Arabic word usually translated as "religion" but also as "way of life", especially referring to Islam, known as ad-dīn "the deen", or dīn al-haqq "the true deen" (e.g. ayat 48:27, 9:33 = 61:9). It is, however, not exclusive to Islam, as Arab Christians also use it to refer to their religion and religion in general. The word “Deen” appears in as many as 79 Qur'anic verses and it is often translated as religion for convenience since there is no equivalent single satisfactory English word. In the Qur'an, Islam is always referred to as Dīn. It is the sum total of a Muslim's faith and the code and conduct necessary to submit to Allah's laws.
Hence, it can be said that Islamic Finance is conducting financial and business matters according to the commandments of Allah(SWT) expressed or implied.
Credit transactions are not to be taken as a routine matter as in business no one has enough capital to give time to debtor till they are able to pay the amount and nor can everyone write them off as charity even if it is the best and it is the best because Allah(SWT) has said so. Therefore, there is no concept of banking in Islam where the business model is borrowing and subsequent lending.
Credit transactions are injurious to Muslims on two accounts. As a creditor, on account of giving respite to debtor in difficulty, disturbance in cash flows leading to default in payment in case of back to back Murabahah and seemingly loss of capital in case of write off to charity. As a debtor, there is no exemption from payment of debt unless it is written off by creditor. His heirs are liable to pay the debt. I quote Ahadith in this connection.
Shaih Muslim 872
Narrated Amr ibn al-'As "The Messenger of Allah (peace be upon him) said: All the sins of a Shahid (martyr) are forgiven except debt."
Al-Tirmidhi
Narrated AbuHurayrah "The Prophet (peace be upon him) said: The soul of a deceased believer is held back on account of his debt till the debt is discharged."
Another very important Hadith on debt based transaction is
Sahih Al-Bukhari 1.795
"Narrated Aisha (the wife of the Prophet) Allah's Apostle used to invoke Allah in the prayer saying "Allahumma inni a'udhu bika min adhabil-qabri, waa'udhu bika min fitnatil-masihid-dajjal, wa a'udhu bika min fitnatil-mahya wa fitnatil-mamati. Allahumma inni a'udhu bika minal-mathami wal-maghrami. (O Allah, I seek refuge with You from the punishment of the grave and from the afflictions of Masiah Ad-Dajjal and from the afflictions of life and death. O Allah, I seek refuge with You from the sins and from being in debt)." Somebody said to him, "Why do you so frequently seek refuge with Allah from being in debt?" The Prophet replied, "A person in debt tells lies whenever he speaks, and breaks promises whenever he makes (them)." 'Aisha also narrated: I heard Allah's Apostle in his prayer seeking refuge with Allah from the afflictions of Ad-Dajjal."
The following sentence from the above Hadith is of particular importance to Muslims "A person in debt tells lies whenever he speaks, and breaks promises whenever he makes (them)." So, there is every possibility of default.
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