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Attique ur Rehman

Student,

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Interest-free banking, real investment, profit and loss sharing, equity... let's bank the Islamic way!

If the Bank works in the following way...?

. A depository institution
. No interest, only service charges
. Only real investment ( like property, cars, gold, business and projects etc.)
. Focus on earnings rather than savings
. Institutionalize the charity through this institution. The charity will be advanced as a loan with three underlying conditions..(1)- if the borrower gets profit, he will return the principle with a little bit profit. (2)- if the borrower only achieves break even, only return the principle. (3)- if he faces a loss, then there is no need to return the principle as charity is not meant to be taken back.

And what if some one wants a car, a furnished home, or even Gold perhaps for her daughter's wedding? well...simple...since you already possess real assets, and you own it, you can charge your own price and advance the asset on easy installments...

A group of think tanks will be consistently working on the new projects, businesses and ideas which will allow the investors to invest their savings in it on profit and loss sharing basis in real terms.

Result: Economic Growth and Development in real terms.

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    Dec 11 2012: .
    "(1)- if the borrower gets profit, he will return the principle with a little bit profit.
    (2)- if the borrower only achieves break even, only return the principle.
    (3)- if he faces a loss, then there is no need to return the principle as charity is not meant to be taken back."
    "..well...simple...since you already possess real assets, and you own it, you can charge your own price and advance the asset on easy installments..."


    Nothing could collapse a banking system faster.
    You essentially argue what is a zero-risk system for the applicant, where the worst case scenario is that I lose whatever assets I choose to use to back the loan, which can be entirely expendable and worthless as I want because I get to determine its value.

    1.Heres a broken down car
    2.I want a £40,000 loan for a business
    3.I cant pay the loan back and the business closed down
    4.Take the broken down car or just write the whole thing off entirely.

    It would be great for me and I'd happily visit a bank like this is Saudi Arabia and run off with a few million, but I wouldn't want this in a country I live in.
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    Dec 10 2012: Are these economic techniques taken from the Koran? What do you mean by the phrase "the Islamic way" in reference to Economics?
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    Dec 9 2012: zero interest is the single greatest obstacle to the economy. interest rate has a meaning. it gives information to entrepreneurs how much savings are available. interest works the same way as price does for products and services. rising price means more demand, and it draws more resources into the field. falling price means lower demand, thus drives producers out of that business. in the same way, rising interest rate means that people prefer saving less, so entrepreneurs can only undertake very profitable businesses. falling interest rate means an abundance of savings, and a signal to entrepreneurs to start investing more.

    a forced (fixed) interest rate of zero sends a message to entrepreneurs to invest like crazy, because investment is free, we have so much savings that we can't ever spend it all, we have so much savings that every investment is viable, we need to build the great pyramid twice the size of the original, we need to build mile high towers, we can paint the moon pink, we can all buy bigger houses, and cars on loan, and so on. sounds familiar?
  • Dec 14 2012: I just want to repeat this because many people here didn't seem to get the point: "Islamic banking" does not mean getting a bank loan becomes free of charge, nor does it mean banks cannot make money off of lending. It's simply a name change: interest is renamed a "service charge" and some people believe that technically acquits them from violating the ban on charging interest that's laid out in the quran and bible, as if god can be lawyered with technicalities.

    I know "Islamic banking" is not covered in Econ 101 but it's readily available on the internet and the OP even hints at it himself (though he doesn't realize it): "No interest, only service charges"
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    Dec 14 2012: I se that you are a student. Lot more learning needed beyond religious idelogies. Perhaps a history of banking will be a good start. Oh yes.."economics 101" will be a good place to stop by. What about the risk of loosing the loan extended and the cost to administer the process?
  • Dec 11 2012: Islamic banking is a farce: substituting interest for a "service charge" of the same size is nothing more than a convenient way for Muslim bankers to run a bank without, technically, charging interest. If I were a Muslims I would think here's a special place in hell for people who think they can fool Allah so easily.
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    Dec 10 2012: Money keeps us all enslaved, calling our slavery "freedom". Why not get rid of money altogether?