Bismillahirohmaneerohim (In the name of Allah, the Most Merciful, the Most Compassionate)
I would like to express a little of the knowledge that I have with me about Islamic banking. I've been getting a lot of questions about the validity of Islamic banking as this is the main concern of the public. Conducting business is an ibadah, so we should always make an effort to do it in the right way. Therefore we have to expand our knowledge. By me saying expand, I don't mean just to refer to a person/scholar, but gain information on many different angle from different people especially from the knowledgeable ones. After doing this, one should know what is best for oneself. Lately, some friends of mine are being slightly influenced by this Sheikh who condemns about Islamic banking. The Sheikh is entitled to his opinion as far as I'm concerned. I'm no where near the status of a Sheikh but I too have an opinion.
Naturally, I was also sceptic about Islamic banking as I've read some books on Islamic banking and because of being raised in Malaysia, my perception on Islamic banking was more towards negativity. This is one of the reason why I took the course of Islamic banking, and also not taking the course in Malaysia. During my course I was ever being sceptic and after completing the course, I've got my own conclusion.
Firstly, the main concern of Islamic banking is because the Qur'an prescribed us in Surah al-Baqarah verse 275
" Those who devour interest, they behave as the one Satan has confounded with his touch seized in the state they say: "Buying and selling is but a kind of interest," even though Allah has made buying and selling lawful and interest unlawful. Hence he who recieves this admonition from his Lord, and then gives up (dealing in interest). may keep his previous gains, and it will be for Allah to judge him. As for those who revert to it, they are the people of Fire and in it shall they abide."
The verse have clearly states that buying and selling is permissible but interests are prohibited. If one were to make a business (buying and selling) without charging interest, is it permissible? Based on this verse, my opinion is that as long as we avoid interest, it is permissible. Now what seems to be the problem?
My friends who asked me about Islamic banking are from Malaysia, so I'm going to base this discussion on the situation in Malaysia. Firstly in Malaysia, their view towards banks as a place to do loans. This is because of the conduct of conventional banks and we as the public have digested this idea where a bank is a place to do a loan. Because of Islamic banking are relatively new compared to the conventional banking, most of us do not have a clue what Islamic banking is all about. So usually the public will then assume. The Islamic bank is not necessarily a place for loan. It is a place to do business. If the Islamic provides loan, it will be Qardh hassan where no interest will be charged. But most of the Islamic banks don't do this because it is not "productive" as they are a place for business. The reason I put the inverted commas on productive is because my opinion differs as I do see Qardh hassan as productive.
So, a conventional bank is a place where they provide an individual with the money, and expects repayment of the loan bit by bit including interest (which is based on time=money). The conventional is not responsible for anything else except collecting the money back from an individual.
Islamic banks are different. If an individual wants to buy something, the bank will buy it from the supplier and sell it to the individual in deffered payments (there is a hadith on buying in deffered payment, it is best for a person to research). What is the different? Firstly, the bank is doing a business (buying and selling) as what was told permissible in the Qur'an. Secondly, when a bank buys something, it is in the responsible of the bank to take care of it (maintenance). This is one of the reason of banks entitlement to earn profit.
Why do the public still are very sceptic towards Islamic banking? There might be two reason for this. Firstly, some Islamic banks might have used the word "pinjaman" (borrowing/loaning) which certainly contradicts buying or selling. The other thing is that the public have 'psychoed' themselves to think that a bank is a place for loan no matter if its Islamic banking or conventional banking. Because of this, I have to point to the Islamic banks for not educating the ummah or the public. But banks are not to be blamed alone, education should come from anywhere, like schools, public functions and etc.
This entry has gone a bit long, for those who are interested, I'll continue in my next entry. Want to read more on the consequences of interests and how it accumulates click here. I have highlighted in the last part of that entry about the amount of interest and how injustice to use interests in loans.