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Interest is Not Prohibited in Islam.

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    Interest is Not Prohibited in Islam.

    Interest is a leagal factor income. It is the earning of Capital Assets just like wage and rent are the earnings of labour and land respectively.

    There are a total of four factors of Income:
    1-Land
    2-Labour
    3-Capital Assets
    4-Enterpreneour

    Production in the Economy is not Possible in the absence of any of the above factors of Production.

    So Production is the combined effort of ALL the above Production factors. Therefore this production (which is the Icome of the society) must be devided into ALL the Production factors.

    Why should labour be given its share in Income and WHY should NOT Capital Assets be given their share in Income.


    So far as Islam is concerned, Islam HAS NOT PROHIBITED INTEREST. ISLAM JUST HAS PROHIBITED RIBA.


    Interest is different thing from Riba. So it is not prohibited in Islam.


    #2
    ohh goody.... I chance to cut and paste my chunk on Islamic finance from another thread....

    *********************************
    At this link is a description of the Saudi American's Islamic Fund. It includes a description of how money is invested in a manner whereby all returns are halaal, by 4 leading scholars of the Ahle-Sunnah.

    The general gist of Islamic finance, as I understand, is the basis that:

    buying low, selling high is halaal
    profit/loss sharing is halaal
    fixed return is haraam.

    So, for example take savings accounts as currently exist under the Western banking system.

    I put $25,000 dollars is a savings account. The bank then invests that money, ie. in property, shares, etc. and makes a profit. Effectively, they then pay me back the money together with a small, fixed share of the profit, say 5% of the value of my account, annually. Even if the bank makes a big profit, I'll only see 5%; if they make a loss, I'm still guaranteed my 5%.
    This is not allowed Islamically. At the end of year 1, no matter what happens, I'll have $26,250.

    An Islamic banking system forbids fixed-returns. In an Islamic bank account, the bank would take the money and invest it. Now say the value of the money goes up by 10%, so the money is worh $27,500, a profit of $2,500. The bank is allowed to take a share of the profits, (agreed and fixed beforehand, say, 50%), and so you get back $26,250 at the end of the year, a 5% gain for you. The total profit is shared (not neccessarily equally) between you and the bank.
    But now suppose the bank lost 10% of your money, so the money is now worth $23,500, a loss of $2,500. Now you bear part of the loss. As you agreed to share 50% of the profit/loss, the amount of money in your account becomes $24,750. The profit/loss has been shared - this is the Islamic concept.

    As for interest-free mortgages, there are a number of ways to do this. The most simple of these is based on the buy-low sell-high concept.

    I want house A, costing $300,000. I do not have $300,000 in my pocket. So I need a mortgage. I go to an Islamic bank, which buys the house for $300,000, and then sells it to me for, say, $360,000, with the payment staggered over time.

    The amount I pay is fixed as never exceeding $360,000. Naturally, should I repeatedly default on payments, the bank has the right to evict me and claim the house.

    Because the amount paid is fixed, and there is no interest involved, the mortgage is considered halaal. The bank has merely bought the house at a low price and is selling it to me at a higher one, and allowing me the luxury of staggering the payment over time.
    Muslims are so good at dividing that they can divide the atom. If you see two Muslims, probably they belong to 3 parties.
    Al-Ghazali

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