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Old 27-04-2012, 06:11 PM   #43
reverendjim
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Join Date: May 2011
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Originally Posted by aulus agerius View Post
You do know that wikipedia is not exactly the most comprehensive resource on Islamic finance right?

My example was deliberately simplistic so that it would be easily understood and dealt only with the "interest free" point because that was the point raised. If you believe that "interest" is the problem, the Islamic finance is not a solution because in substance it still involves interest.

It does certainly have some advantages, but many of those relate as much to cultural attitudes towards debt as to strict law. Views on penalties for late payment, for example, vary: some think they are acceptable in the case of a debtor who can pay but refuses, while others think that they are unacceptable in every case, and yet others permit them, but require them to be donated to charity. The general prohibition on uncertainty in contracts also has advantages in relation to consumer credit, since to makes it possible for the consumer to know with a higher degree of certainty what they will pay.



As you say, big difference from the current system, however, the big difference is not the absence of interest.
The restrictions can also be problematic: in theory they ought to lead to higher interest rates for borrowers; they would lead to greater bank ownership of assets (note that in my "conventional" example, money is lent directly to the consumer, whereas in the Islamic example, the bank itself buys the goods and sells them to the consumer, this is even more true of the lease-sale type of Islamic finance deal. In addition, Islamic finance comes with some restrictions which are essentially religious: you couldn't, for example, use Islamic finance to invest any of the various products forbidden by Islam (such as alcohol and pork).

Islamic finance is also capable of resulting in unaffordable borrowing - consider, for example, the Islamic bonds of Dubai's Nakheel company: through those Dubai borrowed unaffordably and had to be bailed out by Abu Dhabi.
my point is profit and interest amount to the same thing as i think you would agree. the question is how many people see the unsustainability of such a thing no matter what you call it. islamic banks merely covered the "sin", if you will, by coming up with rules and terminology that claim to make a difference but dont. doesn't anyone recognize the practical reason for usery to be called a "sin"? its a very practical reason and has nothing to do with morality really. after all, "god" didn't care if his people practiced usery on the goy, they were just not to practice it on their brother...meaning in their community....meaning their financial system was a closed system...as all are. what is the net effect of profit in a closed system??? think.
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