Concept of Islamic Banking from my perspective

Islamic Banking from my Understanding
Atiq Hamid

I have attended 2 talks organised by Islamic Society of Notts Uni and one by Notts Malaysian Community and have come out with the following based on my opinion.

Money

Asset monet vs Fiat money

-money is just a representative of asset
-money in itself does not have any value of asset

-in today conventional system, money has been manipulated for many many years by the conventional banking operators who have been entrusted to mint/produce money.
for eg: £5 note would read: i promise to pay the bearer on demand the sum of ‘Five Pound’
-it no longer says eg: i promise to pay the bearer on demand the sum of ‘Five mg of Gold ’ or ‘Five g of Silver’ or anything that say the money is a representative of asset.
-i would challenge the central banks of all the world to declare the amount of money in circulation with the amount of asset ie gold, silver that they have, so that other can actually see the represented value of the money.

-in essence, money must represent an asset, to avoid any ambiguity and any dishonesty of printing money for the sake of generating money not backed up with any asset (this money is called fiat money)

-most importantly, we must demand our government to revert to the original concept of money as a representative of asset and to punish those who have been found guilty of generating fiat money (hopefully the government itself is not being guilty in this!)


Keeping your money in a safe place

In Islam, I think there are two ways to achieve the above:

A) Savings
You let the bank keep your money. But remember, the purpose of this saving is just to safeguard the money. By not any means should the bank use it for any investment purpose. The bank is entrusted to keep the money and allows the owner to take it whenever he or she wishes. And the bank will do just that!
-As a token for the service, the bank can charge the owner for safe guarding the money.

B) Investment
-If you want to earn more money, you can invest. This is the beauty of Islamic Finance guided by god. It does not allow us to let the money grow by itself as in conventional banking. This is riba. Money generating fiat money. HARAM.
-To earn more money requires trade between goods or services ie business which have risks. Hence, the money you invest is subjected to profit, loss or stalemate.
-The outcome of the investment will be distributed between the bank, the owner of the money and the person(s) conducting the business according to the proportion agreed initially.
-the bank must monitor the progress of the business to ensure an honest transaction avoiding any attempt of not reporting the actual profit.



Loan/Mortgage to buy cars and houses.

To me, to be on the safe side i don’t like to promote loans or mortgage.

In my opinion as follow:

• Loans will promote you to buys things which you can’t afford to. Eg: brand new car, a new bungalow.

• By avoiding loans, you only spend what you need or what you can afford to. Now people will turn to 2nd hand cars, smaller houses, and progressively turn into a better ones once they can afford to.

• This will reduce the overall excessive, waste demand (DD) in the market, causing the price of overall goods to fall.

• I strongly think that the current loans and mortgage the cause of goods to be expensive these days.


Zakat (obligatory charity)

Compulsory for muslim!!
To help the real needy.
eg: someone which has been struck with disaster like tsunami and such, the most poor and such

Sadaqah (optional charity)

Optional but is strongly encouraged for muslims.
We must help others who are in need.
May god reward us for that.

Conclusion: Islamic finance is proven the best since it is from god. Humans must apply the Islamic finance. We must work for it. Do not linger! The more time we waste, the more sins we will got out from the current oppressive conventional system which just make the rich richer and the poor poorer.

Indeed, Islam is comprehensive. There is strongly a need of a muslim state to really apply all the principle or sharia of Islam.

May god reward us for our effort!