Islamic Banking and Finance

Discussion in 'Business and MBA degrees' started by Kizmet, Dec 9, 2016.

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  1. Kizmet

    Kizmet Moderator Staff Member

  2. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    A search for MSc Islamic Banking and Finance comes up with a bunch of them.

    Some of them go further. In 2000 I worked with a Sufi group called Murabitun that thought this sort of Islamic Finance didn't go far enough and wanted to return to using only a Quranic gold dinar of 4.25 grams and a silver dirham of 3.0 grams (no, grams are not in the Quran, but that's what it works out to be). Thus was born e-dinar: https://www.e-dinar.com
     
    Last edited by a moderator: Dec 9, 2016
  3. Johann

    Johann Well-Known Member

    Those are beautiful coins, Steve. Amazing how some Arabic calligraphy enhances a precious metal coin even further. And from a (very) reasonable $7.50 US. From the State of Kelantan, in Malaysia.

    I think Islamic Finance is well worth learning something about, for everyone. Interesting principles - huge markets.

    J.
     
    Last edited by a moderator: Dec 9, 2016
  4. TomE

    TomE New Member

    With the exponential growth of the world Islamic population combined with the fact that Islamic Banking and Finance (IBF) has only been a proper entity since the early 70's (there was a conference where finance ministers from pre-dominantly Muslim countries came together to talk about alternatives to Western banking practices), there could be A LOT of opportunities with this type of expertise.
     
  5. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    The seigniorage (i.e., markup from the London Fix prices for gold and silver) is also impressively modest. I still have one of their dinar coins that I got sixteen years ago.
     
  6. Johann

    Johann Well-Known Member

    Indeed. There are some innovative practices that do away with interest -at least in its accustomed form. "Rent-to-own" home purchases are not uncommon; I know there are Islamic financing institutions in Toronto (and London, England) that facilitate these purchases for their Muslim clientele. They buy the house and re-sell it to their client on a sliding scale contract. Payments are divided between rent and equity; as equity increases, the rent portion decreases (eventually to zero) while the payments stay level until the end.

    In the non-Islamic market, all this infidel (yours truly, though neither a drinker nor a pork-eater) sees offered to him on "rent-to own" is low-end furniture or an old car - both aimed at those with damaged credit, featuring stratospheric markups and built-in usury - anything to make matters worse.

    Lots of good ideas. Indeed there's plenty to learn, here.

    J.
     
    Last edited by a moderator: Dec 11, 2016
  7. jhp

    jhp Member

    My emphasis - Only if you are Muslim.
     
  8. TomE

    TomE New Member

    Very interesting stuff here and I admittedly am quite unaware as to how much of the system operates. I'm still a bit perplexed about how the lenders or investors benefit if interest is not levied; is there some other way that the lending parties are able to profit from these types of arrangements in IBF?
     
  9. Johann

    Johann Well-Known Member

    Yes - several ways. One is my example, given above. The rent component is structured to include a return on the lender's investment. It's OK to charge rent, but not interest. Other methods involve partnership and share of profits. Islamic banking includes religion-compliant major credit cards. Google "Islamic Visa" and you will see many examples. There are plenty of sites that will give you an introduction to the basic concepts - mudharabah also spelled mudaraba, murabaha, takaful etc. Here's an intro from the Federal Reserve Bank of Boston. https://www.bostonfed.org/-/media/Documents/cb/PDF/islamicfinance.pdf Islamic Finance is likened to socially-conscious investing.

    You have your choice of many other introductions. Just Google "Introduction to Islamic Finance."

    J.
     
    Last edited by a moderator: Dec 13, 2016
  10. jhp

    jhp Member

    As long as you are Muslim.
     
  11. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    I don't see why one would have to be Muslim to learn about Islamic finance. The Murabitun guys seemed perfectly happy to work with me and my employer at that time.
     
  12. TomE

    TomE New Member

    Thanks and great link. Very interesting stuff. I have a friend who works at Morgan Stanley who I forwarded it to. I'm interested in his perspectives on some of the differences between IBF and his own experiences.
     
  13. Johann

    Johann Well-Known Member

    I agree, Steve. Big banks and Visa, etc. can collaborate with Muslim-led companies, for sure. And any person who wants to, can learn about Islamic finance. Plus, I'm sure you don't have to be Muslim to enrol at many fine Universities that teach undergrad and advanced degrees in Islamic Finance - particularly the ones in countries with a non-Muslim majority, e.g. UK.

    I have no religion whatsoever (no, not even atheism) and I've learned a bit. I wouldn't have the gall to ask for a home-loan on Islamic terms. Muslim organizations that grant them should (and do) help their own - not others. But if it struck me (and them) as a good idea, I might invest in securities of an Islamic company - who knows?

    J.
     
    Last edited by a moderator: Dec 13, 2016
  14. Johann

    Johann Well-Known Member

  15. Johann

    Johann Well-Known Member

  16. Johann

    Johann Well-Known Member

    Last edited by a moderator: Dec 14, 2016
  17. jhp

    jhp Member

    I did not make myself clear.

    To practice Islamic finance, you must understand that the parties are to be Muslim. Yes, you can study it. Yes you can "use it" everyday.

    But, Islamic financial institutions in my experience will only apply the Islamic financial rules if and only if the customer is a Muslim.

    In essence, the customers are treated differently because of their religious beliefs. Replace "religious beliefs" with "skin color". Would you tolerate that?
    Imagine Wells Fargo, or Bank of America not charging interest to one customer but charging an other because of their specific religions... Now replace "religions" with "race".

    There is a big difference between theoretical, and the academic joy of learning versus actual use. So, yes, do study it.

    And, yes; first hand experience.
     
  18. TomE

    TomE New Member

    Very interesting remarks here and your WF and BOA examples do raise some rather harrowing questions. However, do the Islamic financial institutions have both Muslim and non-Muslims as customers/clients? If not and they deal exclusively with Muslim clients, this seems like they would have a bit more discretion in determining interest rates based off of other factors. If they do have both client bases, I can definitely see a problem with this, but why would non-Muslims even consider doing business knowing that their rates would be significantly worse? Wouldn't it make more sense for non-Muslims to "vote with their feet" and to do business with those who would not only offer more favorable terms, but would not base decisions on religion?
     
  19. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    Now that I'm all curious about this, I contacted two U.S.-based Sharia-compliant home financing services and they both said that they offer the same terms to Muslims and non-Muslims, and they both sounded a little surprised one might assume otherwise.
     
  20. jhp

    jhp Member

    My experience was not in the US, but US ally country. Maybe there are institutions that offer the same, but from what I read from imams and my experience, it seems to be different treatment for Muslims vs non-Muslims.
    Maybe it is just me.
     
    Last edited by a moderator: Dec 14, 2016

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