Comments on: So what exactly is Islamic investing? http://www.moneyrelations.com/2007/12/10/so-what-exactly-is-islamic-investing/ Investing for beginners Mon, 08 Sep 2008 10:30:38 +0000 http://wordpress.org/?v=2.5.1 By: moneyrelations http://www.moneyrelations.com/2007/12/10/so-what-exactly-is-islamic-investing/#comment-1182 moneyrelations Thu, 13 Dec 2007 01:00:40 +0000 http://www.moneyrelations.com/2007/12/10/so-what-exactly-is-islamic-investing/#comment-1182 I had absolutely no idea that the Mennonites didn't accept interest either! Good to know that these ideas are not specific in Islam but passed into Christianity as well... after all, it's the same God. Thanks, Nancy! I had absolutely no idea that the Mennonites didn’t accept interest either! Good to know that these ideas are not specific in Islam but passed into Christianity as well… after all, it’s the same God.

Thanks, Nancy!

]]> By: Nancy (aka money coach) http://www.moneyrelations.com/2007/12/10/so-what-exactly-is-islamic-investing/#comment-1178 Nancy (aka money coach) Wed, 12 Dec 2007 21:48:50 +0000 http://www.moneyrelations.com/2007/12/10/so-what-exactly-is-islamic-investing/#comment-1178 Our equivalent are some of the mennonites who are members of credit unions and interest is not part of the picture. There's one in particular in Sask - the non-mennonites get hugely disproportionate interest paid on their savings because the mennonite members forgo theirs -- I know it exists, but couldn't find the website. And of course, Citizens Bank of Canada, while happy in the world of interest, is all about ethics (ie. it's part of the dna) - and doesn't do lending/business with animal-testing businesses, nuclear, tobacco, gaming etc. Our equivalent are some of the mennonites who are members of credit unions and interest is not part of the picture. There’s one in particular in Sask - the non-mennonites get hugely disproportionate interest paid on their savings because the mennonite members forgo theirs — I know it exists, but couldn’t find the website.

And of course, Citizens Bank of Canada, while happy in the world of interest, is all about ethics (ie. it’s part of the dna) - and doesn’t do lending/business with animal-testing businesses, nuclear, tobacco, gaming etc.

]]> By: moneyrelations http://www.moneyrelations.com/2007/12/10/so-what-exactly-is-islamic-investing/#comment-1170 moneyrelations Wed, 12 Dec 2007 02:52:17 +0000 http://www.moneyrelations.com/2007/12/10/so-what-exactly-is-islamic-investing/#comment-1170 I really don't know, Traciatim. I'm not a home owner ;) However, in the Western system, I would assume that would be in your contract if you can only pay by fixed installments, if you can accelerate your payments, if the payment amount is capped, etc. For the Islamic system, Wikipedia explained it like this: "In an Islamic mortgage transaction, instead of loaning the buyer money to purchase the item, a bank might buy the item itself from the seller, and re-sell it to the buyer at a profit, while allowing the buyer to pay the bank in installments. However, the fact that it is profit cannot be made explicit and therefore there are no additional penalties for late payment. In order to protect itself against default, the bank asks for strict collateral. The goods or land is registered to the name of the buyer from the start of the transaction. This arrangement is called Murabaha. Another approach is Ijara wa Iqtina, which is similar to real-estate leasing. Islamic banks handle loans for vehicles in a similar way (selling the vehicle at a higher-than-market price to the debtor and then retaining ownership of the vehicle until the loan is paid)." Like I said, semantics. No matter what <b>legal</b> interpretation they have, to me, it's still "interest". Let's just say I don't disagree with you but I wouldn't call them dupes... Maybe I just don't fully understand it either. In your scenario, if coming into an inheritance, I would assume that a Muslim would just pay off what he/she owed the bank - seeing as the bank resold the house back at a <b>higher</b> price. I really don’t know, Traciatim. I’m not a home owner ;)
However, in the Western system, I would assume that would be in your contract if you can only pay by fixed installments, if you can accelerate your payments, if the payment amount is capped, etc.

For the Islamic system, Wikipedia explained it like this:

“In an Islamic mortgage transaction, instead of loaning the buyer money to purchase the item, a bank might buy the item itself from the seller, and re-sell it to the buyer at a profit, while allowing the buyer to pay the bank in installments. However, the fact that it is profit cannot be made explicit and therefore there are no additional penalties for late payment. In order to protect itself against default, the bank asks for strict collateral. The goods or land is registered to the name of the buyer from the start of the transaction. This arrangement is called Murabaha.

Another approach is Ijara wa Iqtina, which is similar to real-estate leasing. Islamic banks handle loans for vehicles in a similar way (selling the vehicle at a higher-than-market price to the debtor and then retaining ownership of the vehicle until the loan is paid).”

Like I said, semantics. No matter what legal interpretation they have, to me, it’s still “interest”.

Let’s just say I don’t disagree with you but I wouldn’t call them dupes… Maybe I just don’t fully understand it either.

In your scenario, if coming into an inheritance, I would assume that a Muslim would just pay off what he/she owed the bank - seeing as the bank resold the house back at a higher price.

]]> By: Traciatim http://www.moneyrelations.com/2007/12/10/so-what-exactly-is-islamic-investing/#comment-1159 Traciatim Tue, 11 Dec 2007 13:36:19 +0000 http://www.moneyrelations.com/2007/12/10/so-what-exactly-is-islamic-investing/#comment-1159 I don't see much of the difference between being charged a fee and being charged interest. The banks will make their money no matter what their fee structure is. I haven't done much reading on Islamic investing and banking since it doens't really concern me that much but from what I've looked at it seems like the exact same thing. Say you take out a mortgage, your 'mortgage cost' will be 120K on 100K mortgage so your balance will be 220K at the start. In 'normal' capitalist interest mortgages you will pay 120K in interest over the course of time so you balance doens't look bad. Maybe I'm missing something big... but what happens if you land a sweet inheritance and want to pay off your mortgage on day 2? In Islam do you have to pay 220K and in our banking system you would pay the 3 month interest penalty and 100K? Maybe I'm missing something, but I don't see any advantages other than more profits by banks by offering products to people that believe in things because they are told to. I don’t see much of the difference between being charged a fee and being charged interest. The banks will make their money no matter what their fee structure is. I haven’t done much reading on Islamic investing and banking since it doens’t really concern me that much but from what I’ve looked at it seems like the exact same thing.

Say you take out a mortgage, your ‘mortgage cost’ will be 120K on 100K mortgage so your balance will be 220K at the start. In ‘normal’ capitalist interest mortgages you will pay 120K in interest over the course of time so you balance doens’t look bad. Maybe I’m missing something big… but what happens if you land a sweet inheritance and want to pay off your mortgage on day 2? In Islam do you have to pay 220K and in our banking system you would pay the 3 month interest penalty and 100K?

Maybe I’m missing something, but I don’t see any advantages other than more profits by banks by offering products to people that believe in things because they are told to.

]]> By: moneyrelations http://www.moneyrelations.com/2007/12/10/so-what-exactly-is-islamic-investing/#comment-1143 moneyrelations Tue, 11 Dec 2007 02:57:14 +0000 http://www.moneyrelations.com/2007/12/10/so-what-exactly-is-islamic-investing/#comment-1143 @ Traciatim, thanks for commenting I know, I know but it's the religious ideals that are worth mentioning. I find it funny how as we make advancements in society, we long for the "simple life" or yearn for doing business with ethics. The problem is, as humans, we often fall short of these ideals and use any holy book to attack or oppress others. @ GSC, Plonkee, KZ Hi ladies, Duly noted and I will try to write up more on a subject in which I'm woefully ignorant and try to do it justice. I heard about the Islamic mortgages from my English aunt as she was trying to buy a house... Like I said, it's semantics and sophisticated legal maneuverings. I might call it a canard in French but it's still a duck in English. And thanks, Karen :) @ Paul Dude, I dug you out of the dungeons. Bad boy ;) @ Traciatim, thanks for commenting

I know, I know but it’s the religious ideals that are worth mentioning. I find it funny how as we make advancements in society, we long for the “simple life” or yearn for doing business with ethics.

The problem is, as humans, we often fall short of these ideals and use any holy book to attack or oppress others.

@ GSC, Plonkee, KZ

Hi ladies,

Duly noted and I will try to write up more on a subject in which I’m woefully ignorant and try to do it justice.

I heard about the Islamic mortgages from my English aunt as she was trying to buy a house… Like I said, it’s semantics and sophisticated legal maneuverings. I might call it a canard in French but it’s still a duck in English.

And thanks, Karen :)

@ Paul

Dude, I dug you out of the dungeons. Bad boy ;)

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