Islamic banking goes nationwide

[AYOUB]

Last Updated: Wednesday, 14 June 2006, 06:47 GMT 07:47 UK

By Julian Knight

Personal finance reporter, BBC News

 

Lloyds TSB is to offer current accounts and mortgages which comply with Islamic law through its 2,000 strong branch network from Wednesday.

 

The bank has offered such accounts since 2005 but only in a few branches.

 

The bank will concentrate its main marketing push in about 100 branches in areas with a large Muslim population.

 

An Islamic scholar advising the bank told BBC News that access to such services would ultimately mean "less exclusion and less extremism."

 

Traditionally, many Muslims have shunned mainstream financial services and High Street banks because their products do not comply with Sharia law.

 

Under Sharia Islamic law, making money from money, such as charging interest, is usury and therefore not permitted.

 

Wealth should be generated only through legitimate trade and investment in assets.

 

Investment in companies involved with alcohol, gambling, tobacco and pornography is strictly off-limits.

 

Ethical

 

Both Lloyd TSB's current account and mortgage products are open to non-Muslims.

 

And according to Mufti Barkatullah, one of a four-strong panel of Islamic scholars advising Lloyds TSB, the concept of Sharia appeals to the wider community.

 

"Sharia is about an ethical way of life and appeals to many people," Mr Barkatullah said.

 

"I have been told that as many as 20% of people enquiring about Islamic products in one area are non-Muslim."

 

Mr Barkatullah added that the spread of Islamic financial services would help combat social and financial exclusion amongst the UK's 1.6 million Muslims.

 

"Everyone needs financial services...we should see less and less exclusion and less extremism," he said.

 

Lloyds TSB said it will expand its range of Sharia-compliant financial products.

 

The bank said it planned to launch an Islamic student current account in time for the new academic year.

 

The bank is not the only provider of Islamic financial services; HSBC, the Islamic Bank of Britain, and West Bromwich Building Society all offer Sharia-compliant products.

 

Chancellor's call

 

Meanwhile, on Tuesday, Chancellor Gordon Brown called for the UK to become a centre of Islamic finance.

 

Speaking at the Islamic Finance and Trade Conference the chancellor said he wanted to make the UK "the gateway for Islamic finance".

 

He pointed to reforms of the tax system to make Sharia compliance easier.

 

Islamic financial services are big business.

 

Analysts estimate that worldwide the industry is worth between £200bn to £300bn a year.

[Socod_badne]

How do Islamic Banks make money to cover costs?

[Jacpher]

Read Islamic Banks for Dummies.

[Socod_badne]

Jimcaale,

 

Why don't you enlighten me? Just for the heck of it!

[Jacpher]

I thought inaad wax walba daadisay, damdamtii xagee ka dhacday?

[AYOUB]

Originally posted by Socod_badne:

How do Islamic Banks make money to cover costs?

I hope this explains how the UK version works, and is this what some believe Topic: Fatwa on the Impermissibility of the HSBC and other "Halal" Mortgages.....Excellent

[Dhagax-Tuur]

Good on Lloyds. i'm actually considering of changing accounts. i'm tired of accounting for the interest increase in my small money with other banks. enough haram in our lives already. good move for Lloyds. muslims are unique market with alot of potential in the UK.

[Jamster]

I have had an account with Islamic Bank of Britain and now they have introduced Home financing through a process called Musharaka.

[Resistance]

I still have my concerns about this so-called islamic banking and financing, somehow is just a comprimise position but i guess untill am knowledgeable enough in this area i will reserve my judgement.

[ElPunto]

^Prolly a very good idea

[Nur]

As Islam wins more hearts than any other organized faith in the world, as the fastest growing relgion, Islamic Hijab is seen everywhere, Islamic everything is sprouting in every aspect of life, but the most vindicating testament is the Islamic theory of Banking and Finance, people know where it hurts the most, their wallets, so they fix it with Islamic Banking Instruments.

 

Nur

[Warrior of Light]

It is a good sign, Islamic Banking & financing Services are increasing all over the world mashallah but alot of muslims havent made use of these facilities.I still beleive muslims need to be educated more on how to utilise them.

[S.O.S]

A/c all,

 

Muslims don't always realise the importance of conducting all their commercial interests in the strict sense of Islamic ethical and moral sphere. If all or most financial/banking institutions of the Muslim world adhered to Islamic principles (especially in the current globalised capital markets) irrespective of their economic status globally, we can only speculate the possibilities of past historical actions and consequences following such course of event repeating itself at whatever rate...

 

As long as initiatives continue to come fro non-muslims rather than Muslims, I see no reasons for optimism yet. No rational (capitalist) banking institutions would give up the right to "create" money out of nothing. As for the Muslim world, we can only pray to Allah to ease our way - and how long the way!

 

W/S.

[Naden]

Nur,

 

but the most vindicating testament is the Islamic theory of Banking and Finance

Can you explain those theories as you see them (a few, at least)? Many people, including myself, are not convinced that these so-called practices are any different than mainstream ones. I think at least this gallery can have a debate/discussion. Perhaps the discussion will shed light on the Quran's take itself which is where it should start, really.

 

Unlike some comments above, widespread anything does not make it legitimate, ethical, moral, or even of a good business sense. It just means that people follow by nature and are too lazy to explore.

[Nur]

Naden sis

 

In a past thread " Islamic Finance" you have written:

 

"The value and intent behind a policy/practice has to jibe with the meaning behind the Quran's words."

 

Well sis, you have summed it up brilliantly, baarkallahu feeki, its not only about the instruments we use for transactions that count but also the driver behind them, in adddition, the INTENT as you have put it, is what completes the picture, when we do it in compliance with Quran and Sunnah.

 

 

The Islamic Economic Theory begins with the ownersip of wealth, Allah is the real owner of all wealth, Mankind is only a care taker of Allah's wealth, from there downwards, all of the transactions are tied with the Moral of the Law, Justice. A general rule of thump! If a trasaction is no equittable, its Haram.

 

But what is equittable?

 

Unlike the capitalist system, in Islamic Economics, equity or ownership of wealth is transferred from Allah to people by virtue of just economic transactions.

 

Allah SWT says in Quraan " Do not consume ( taakuluu) wealth in transactions between you unjustly"

 

The stakeholders in any transaction are:

 

1. Parties in a transcation

2. Community

 

Allah , therefore made it Haraam, that wealth circulates among the rich only as its is according to the present capitalst system. Wealth must reach all segments of society equittably.

 

With that above spirit, we have to review the present financial systems, including " Islamic Banking: which lately has become a new fad and a new tool for the rich to get richer.

 

This topic requires rigorous treatment due to its technical nature, so in due time, and inshAllah this time, sooner than later, we shall examine it in light of Quraan and Sunnah.

 

Jazaakellahu kheiran for bringing up a timely question to the board.

 

Nur