The two main pillars of modern banking involve lending and borrowing of money on interest and fractional reserve system. On scrutinizing the laws of economic system of Islam both these two things are strictly prohibited. So an Islamic bank is supposed to function without involving interest and fractional reserve system. The various definitions of Islamic bank clearlily point out towards sharing of profit and loss and prohibition of interest. However the complex financial system of modern world requires a very comprehensive knowledge of the subject in order to isolate a non interest based transaction from an interest based transaction. Various services of Islamic banks involve a clear factor of interest although they justify it by quoting fatwas of Islamic scholars which have a very poor understanding of this subject.
In Quran interest is defined as kind of ‘Riba’. An Australian Jew “leopold Weiss” who later reverted to Islam has so much clear understanding of the subject of Riba that hardly any one among the current Islamic scholars can come close to him. His work on Riba has remained unchallenged from many decades. According to Quranic terminology Riba refers to “any unlawful addition by the way of interest, to a sum of money or goods lent by one person or body of persons to another.” The kind of interest which is involved in lending and borrowing of money by modern banks is known as “Riba al-fadl” in Islam. If the price of an article is increased in a credit transaction which involves deferred payment is known as “Riba al-nasiah”. There are at least seventy different forms of Riba which are mentioned in the holy Quran. But the understanding of the above mentioned two forms is very important for understanding the kind of Riba which is involved in “Murabaha” service of current Islamic banks. The list of services offered by current Islamic banks is very long, but Murabaha is most common service offered by all. Murabaha is actually a backdoor through which money is lent on interest by manipulating a loan as a sale on credit. The definition of murabaha given by Islamic banks is “it is a contract for purchase and resale and allows the customers to make purchases without having to take away the loan and pay interest”. Bank purchases the goods on behalf of the customer, and resells them to the customer on an agreed profit margin and the customer pays the sales price for the goods over installments. In a Murabaha transaction an item is offered by an Islamic bank to its client on a price which is higher than the market price of the item. Banks claim the extra amount charged as their profit.Islamic banks called this transaction as a credit transaction thus justify it as a legal under Islamic law. As Prophet Mohammad (PBUH) on various occasions during his blessed life has engaged in credit transactions, but he never paid or accepted an extra amount over the market price of a good. In any kind of credit transaction where price charged is higher than the market price is nothing but an act of Riba. It is clearlily obvious fromQuran and Hadith that when time is the only factor responsible for an increase without labour and risk, is an indication of Riba. During the Murabaha transaction the item is purchased by the customer himself, the Islamic bank only credits the account of client by a certain amount with a bank holding a lien on the item until the sales price is eventually paid back to the bank. The bank is claiming to have sold an item which he never really owns or purchased in his name. The purchasing of an item with one’s own name involves risk of loss as the market price may fall because of demand supply relationship. So an Islamic bank like traditional banks has immunized himself from loss as the bank has to only collect his amount with a fixed increase. It is nothing but an act of Riba according to Quran and Sunnah. The Islamic bank actually lend a specific sum of money on interest over a specific period of time and then denominate the ‘loan’ in the amount of a final total that included the total interest payments as money due, on a ‘sale’. It can be easily concluded that murabaha is nothing but lending of money on interest through the back door. The money masters who have designed this evil interest based banking system were aware of the fact that they cannot directly drag everyone in this evil system, so they have created this illusion of Islamic banking.
Islamic window is another menace created by capitalistic banks to offer Sharia complaint products to sensitive customers of a particular target group. How is it possible that a bank which is running on a business model that is completely prohibited in Islam can offer some products which are Sharia complaint? All over the world there are conventional banks like HSBC which have opened an Islamic window for serving a particular target group of sensitive customers. Reserve Bank of India (RBI) has decided to open up Islamic windows in all conventional banks for a gradual introduction of Sharia based products. It is a part of well-designed plan to drag pious people in to the evil of interest through the backdoor. Offering Sharia complaint products by conventional banks is like a cigarette manufacturer has opened a cancer hospital. According to one Hadith of prophet Mohammad (PBUH) which was narrated by Ibn Isa, and recorded in Abu-Dawood as a Hadith number 3325. “There will come a time when you will not be able to find a single person in the world who will not be consuming Riba. And if anyone claims that he is not consuming Riba then surely the dust of Riba will reach him. At that time the only option left for preserving your faith is to migrate towards a mountain side with your sheep and goats or to wage a war against the evil system of Riba”.
Writer is MBA, M.PHIL Email : firstname.lastname@example.org