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No difference between Islamic and conventional banking

Mu' meneen Brothers and Sisters,

As Salaam Aleikum wa Rahmatullahi wa Barakatuh.  (May Allah's Peace, Mercy and Blessings be upon all of you)

 

One of our brothers/sisters has asked this question:

Dear Brother,

Assalamoalaikum,

 

I have two question as below please explain in light of Quraan and Sunnah.

 

Q1. I would like to know there is so many Islamic Bank they are providing loan for Car or other work. Instead of interest which other banks charging x% per annum, they (Islamic bank) are saying profit and charging x+1% per annum.

My question is taking loan from Islamic bank for car or other work is 100% Halal or not? Since some of my colleague are saying both are same Islamic bank just renamed the interest as profit and charging more amount.

 

Q2. As per n-number of question answer, which is available at your site, what I can understand. Doing job in Bank is not good for Muslim. My question is Banking is very big sector where n-number of Muslims working. If we segregate ummah from banking than who will control banking sector. Should we leave this sector for nonbeliever?

 

 JazakAllahKhair,

 

(There may be some grammatical and spelling errors in the above statement. The forum does not change anything from questions, comments and statements received from our readers for circulation in confidentiality.)

 

Answer:

 

No difference between Islamic and conventional banking


In the name of Allah, We praise Him, seek His help and ask for His forgiveness. Whoever Allah guides none can misguide, and whoever He allows to fall astray, none can guide them aright. We bear witness that there is no one (no idol, no person, no grave, no prophet, no imam, no dai, nobody!) worthy of worship but Allah Alone, and we bear witness that Muhammad(saws) is His slave-servant and the seal of His Messengers.

 

Q-1: My question is taking loan from Islamic bank for car or other work is 100% Halal or not? Since some of my colleague are saying both are same Islamic bank just renamed the interest as profit and charging more amount.

Dear Brother in Islam, there are several good Islamic banks and Islamic Financial Institutions, that adhere to the Shariah in their financial transactions. If these Islamic financial institutions are not 100% Islamic in your view, brother, you will at least agree that they are trying to work towards the right way as ordained by Shariah. Islamic banking is still in its infancy, and they need all the support and help of professionals who are sincere believers. And if believers and brothers like you and us do not help and support them; we cannot expect the pagans and the disbelievers to come and help them! The thing is brother, the world is so used to the forms of conventional interest-based banking, that it is difficult to convince someone to start a new or alternate phase of banking, which adheres to the Shariah and Laws of Allah.

 

Besides, all these banks have Shariah boards, with eminent scholars who approve each and every transaction or deals, done by these Islamic institutions. Instead of us pointing fingers at the work they do, it would be prudent if one is a believer and a banker, to join one of these Islamic financial institutions, and help them to reach their goal of interest-free banking.

 

There is absolutely no doubt that conventional banking is interest-based, and therefore haraam. And even if in your view, the Islamic banks are not 100% interest-free; you will at least agree that they are at least trying to conform with the laws of Shariah. Thus if one is a believer and wishes to take a loan; he should obviously opt to take it from legal sources and thus further the cause of Islamic banking, rather than from the guaranteed haraam transactions of a conventional interest-based bank.

 

Brother, please do not misunderstand us. We am not trying to protect or say that all of the current Islamic financial institutions are all 100% in conformity with Shariah; what we are trying to say is that if the only choice for a person is transacting with a conventional bank or an Islamic bank; we just think that it would be purer for him to take his transaction to the Islamic financial institutions. Insha Allah, Allah will help them and maybe in 30 or 50 or 100 years they will actually be recognized as a halaal alternate source of banking. This process has to start somewhere someday and today is as good a day as any! Their intention is good, and it is expected that their results will also be good, Insha Allah.

 

Q-2: As per n-number of question answer, which is available at your site, what I can understand. Doing job in Bank is not good for Muslim. My question is Banking is very big sector where n-number of Muslims working. If we segregate ummah from banking than who will control banking sector. Should we leave this sector for nonbeliever?

Conventional banking is indeed a huge sector in itself, but in the past 30 years or so, Islamic banking has come of age, and today it is the fastest growing sector in the banking industry. Several of the big banking houses like Citicorp, HSBC, ABN-Amro, etc. have started their own Islamic banking units, and it is only a matter of time when non-interest based banking will be a power and institution to be reckoned with.

 

It is not to say that muslims should not associate themselves with the financial world, but if Allah Subhanah has blessed a believer with financial knowledge and with faith, it would be beneficial to him and to the Islamic Ummah if such brothers would use their expertise to formulate and associate their knowledge and skills in strengthening interest-free banking. Allah will reward each one of us for our intentions and if the intention of a believer is to substitute his expertise in the field of conventional banking with helping the cause of interest-free Islamic banking; it will not only be his source of earning halaal income for himself and his family; but will, Insha Allah, also be a source to earn huge reward from Allah Subhanah on the Day of Judgment.

 

Whatever written of Truth and benefit is only due to Allahs Assistance and Guidance, and whatever of error is of me. Allah Alone Knows Best and He is the Only Source of Strength.

 

Your Brother in Islam,

 

 

Burhan

 


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