Islamic Bank in Oman

[Bimzoori]

Lets start the discussion about Islamic banks :) I have some questions about this topic :)

[Arabian Princess]

Bimmi place you questions and we might be able to draw discussions from them.
First, I think you know why Islamic Banks are differnet coz they dont give intrest out of the depositis you put. Coz these deposits are considered Riba or usury since they are fixed amount of money that you did not earn by your work.

Waiting for you questions and other members questions

[Bimzoori]

First, I would like to know..what would be the difference if I invest my money in an Islamic bank vs regular bank..?

[Arabian Princess]

ok I will answer u .. just give me time

[Arabian Princess]

Ok as I mentioned above,
The major problem or a regular bank according to Islam is the insitution of Intrest.
Some people say that Intrest is not usury or Riba .. but that is proven to be wrong .. why? ok .. when a person deposits his money in the normal bank he gets fixed return out of it without working and without moving a fingure .. he expects that return and if he did not get it he can sue ! Why does he expects that return? because the bank borrows this money from the depositrs and invest it in a busniess and then the return is totally for the bank. The intrest is the reward because he allowed the bank to borrow the money.

In an Islamic bank, there should not be any fixed amount given to the dipostors if they wish to give thier money to the banks to use them as investment. Thier deposits should be placed under some business operations (if you want to know about them I could explain it to you later) and the return of these operation wether they were profits or loss is shared between the depositors and the bank.
Now, since no depositor wished to lose his money .. this makes the regular bank attractive (but islamicly it is haram) . He has other options then .. he could keep his money as a (wade3a) an amoount that is not "used" by the bank. Any time the depositors claim his money he gets it back with no addition or submittion. Ofcourse the bank could use these amounts if the depositors agree (maybe it is writen in the depositing agreement) but he is obliged to return the money fully.

This is basicly the differnece between the Islamic bank and a normal bank.

[Bimzoori]

Ok, my next question is, is there really an "Islamic Bank" ?? I mean, an Islamic bank might, as you well said, be following Islamic rulings..but isn't it conneced to other banks which dont?!

I dont know if my question makes sense..if not tell me and I'll put it in another way ;)

[Arabian Princess]

Well actually Bimmy ur question makes alot of sense ..
many people have questioned the validity of Islamic Bank.
One fact taht everyone should know .. if a bank deals with another bank (non Islamic) taht deals with intrest .. then that bank is not truly Islamic (ofcourse you know that usuary is prohibited in all ways)
The number of ISlamic banks are increasing now though .. and thats a good sign because it could help the Islamic banks to depend on other Islamic banks.
But, one important thing that all people concerned with this issue should know .. a bank cannot work without dipostors. Many banks are scared when they dicuss all issues because normally people prefer to deposit in conventional banks because they get intrests out of thier deposits. Islamic banks tried to solve this problem by engaging in busniesses that earn somhow a sure return .. but that acts somehow like intrest if it was over used!!!!
I mean banks should enter into venture to help the community instead of entering ventures that would create burdens on the communities. These ventures are like financial lease .. where for example you needed a sewing machine .. THe bank buys it .. and rent it for you .. but after a certain period you have to buy it !!! that would ofcourse create a burden on you .. teh same burden that the a loan with intrest would create!! ofcourse it is HALAL .. but it should not be overused!
NOw what are the good ventures that banks should enter .. they should be thigns that they hold risk with .. Mudharaba .. where the bank is teh financer .. and the loaner is the enterpunerer .. the enterpunerer runs the business and the profit is shared in a specified amount with the bank. and if there was no profit .. the bank loses. Here the person operating will try to work harder to improve coz he is earning out of it.
ofcourse there are drawbacks of this method . but overall it is better than giving a loan with intrest!!

[mimosa]

According to strict definitions, there are no Islamic banks. All are part of or connected to conventional banks.

But don't be too hard on yourself for wanting to get a return on your investment. The Islamic model and the conventional system of loans are virtually identical in practical terms: Islamic banking allows you to invest in a company and share in its profits at a guaranteed level of return (i.e. in lieu of an interest rate). That is effectively what you do when you put your money in a bank which lends it to someone else - they pay the bank a share of their turnover at a fixed (interest) rate, which comes back to you, less a difference for wehat the Islamic bank would call an 'administrative charge' and the conventional bank would call a profit. The purest forms of Islamic banking are to invest your money without a guaranteed return - just like buying stocks. You share the losses as well as the benefits, and hence there is no possibility of 'usury'. But not many banks do this with your deposits, they simply don't get many customers for a savings account which could go down!

The stock market is probably the most 'Islamic' form of investment, as you always share the profit and loss. An Islamic bank can do this for you, effectively acting like a broker with your savings deposits. But you would also be confident that the companies invested in were not of certain types proscribed by Islam.

Ultimately, if you are concerned about the ethical implications of what you do with your money, the most important thing is your intention. If you have the expertise, invest by yourself in individual companies of which you approve. But otherwise, a guranteed return from an Islamic bank attached to a reputable international conventional bank would be the best way of keeping your conscience clear and your finances healthy :)

[Arabian Princess]

Mimosa,
if an Islamic bank gurntees thier depoistors any fixed return .. then it is no more an Islamic Bank.
But, a purly ISlamic bank should be expert in how it manages its investments in order to engage in businesses that would somhow bring "good" return and its depositors wont really be scared to lose thier investment.
My lecturer proposed this argument for Islamic banks:
it should have two kinds of depositing systems ..
risk depositis system (ofcourse it should be called this :))
and no risk depositing system.
In the begining of Islamic banks, the bank should persuade wealthy muslims to deposit in risk acounts .. and use it for investmnet as share and loss investment. This would help the Islamic banks to learn where the business is really is.
The other account should be only given to depositors without giving them any return back .. so it is like a loan without return.

after some time, when the bank is an expert in investment .. it would allow small depositors to use thier money in the bsuniesses the bank engages in .. and this way although the bank would not ensure a fixed return to teh depositors it it would deposit a good amount of money taht will encourage more depositors to come and deposit.
Ofcourse any fixed return from the banks shoudl be banned!!!!

[IceTea]

I was listening to a program in Oman TV about economics and the gust was a manager of one of the commercial banks in Oman, so there was a question about Islamic bank in Oman. The gust answer said that the government don't have any plan for the time being to open such banks. But he didn't mention any reason for that. What do u think could be the main reasons for going into this direction ?

[shamsery]

Sorry Princes,
The leads and answer are rlated with Banking. Banking,Money,Finance are the terms used as part of economics.
It does not reflect on What is Capital,Labour,Orgnization,Profit,Surplus Valu etc.

[Arabian Princess]

ok shamsery,
I will try to answer you but your question is very vague, can you ask a specfic quetsion and I will try to lead the answer from there.

[shamsery]

Dear Princess,
A request you to initiate a discussion on economy to examine what system can bring maximum benefit for the mankind. Let examine the contradiction among Capitalistic economy, socialistic economy & Islamic Economy.
Regards

[Arabian Princess]

Shamsry,
I opened a topic about Capitilzm, communism and Islamic economy. Maybe you could discuss the same points over there.

[Arabian Princess]

would like to have other members opinion in this topic.
I am sure mux would have something to say scince he is a coporate banker.

[Muscati]

I don't know much about Islamic Banking myself. I haven't really studied it. I only know the basics. On the face of it, Islamic Banking is nothing more than window dressing. To me it sounds like nothing but a rip off. Normal banks charge interest on borrowing, Islamic banks call it profit.

I might be going to Bahrain to meet with some Islamic banks next week. If I do, I'll have a more concrete opinion which I'll share with you here.

[IceTea]

Islamic banks=window dressing (mux theory) !!

Are you saying this to protect the comercial banks and protec your job, think about it from the religious point of view, why most people are making "gam3yat", is it to get rid of the high interest rates which is killing Omani people and spend 1/2 of their lives paying the banks for uesless loans.

[Arabian Princess]

Mux,
we have to diffrenciate between two things here, what is really Islamic Banking and what is practiced nowadays.
The real concept might be far from what is practiced. The profit which you are talking about comes from real busineses where the depositor do really share the risks, not like the current trend where the Islamic banks claims that the depositors share the risks but it never happens!!
ofcourse, you would come and say why then put your money in a bank when you might lose it???
there could be another scheme where there is no profit and nothing given back to the depositers. What he deposits, gets it back fair and square!, the money of those depositors could be an intrest free loan to the bank where it could be invested but the gurntee that anytime the depositer needs the money, it should be there. Somthing like whats done in current banks now.

[Muscati]

Originally posted by IceTea
Islamic banks=window dressing (mux theory) !!

Are you saying this to protect the comercial banks and protec your job, think about it from the religious point of view, why most people are making "gam3yat", is it to get rid of the high interest rates which is killing Omani people and spend 1/2 of their lives paying the banks for uesless loans.

Dude, I admit that I don't know much about the subject and hence I refrained from entering a discussion about it until such time that I have the necessary information. I know when to discuss something, and when not to. Which is more than I can say about you since you seem to have a very strong opinion without really having all the facts. You are just trying to force an opinion on me, and it quite simply won't work that way.

[Wisdom Seeker]

I want to say that by applying a little bit of sense to the subject we might land on a conclusion on why won't the government allow the Islamic banks in our beloved country. If we took into consideration that the only people that are going to benefit from this permission are those people who control the market now because they are the only ones that have the required capital to do so, since this kind of banks would attract a large portion of the people to deposit their money in this bank this would be a good investment for them. Now why wouldn't they do that and just open an Islamic bank. This leads us to a formula which states the following:
rich people = people who control decision in the Omani government. Islamic banks = a not bad some of profit.
Islamic banks are not allowed in this country.
Therefore there is someone who is honest enough to think that these banks are not Islamic and for that reason will not allow those Haawameer to gain profit from an Islamic wanna be banks.
I am at least 98% convinced that there is no such a thing as an islamic bank since all banks are connected together in a large economic network.
I also would like to say that what we are using as money is not what the Islamic law says could have a rabawi dealings with. this is because this banknotes are ony concdred with a value as long as the government who issued it is available.
Riba can only be in 5 things and they are gold weat and another three things that i dont recall but they dont include the money we are using today.
Now lets say for example that i took a loan from a bank in Iraq before the gulf war for an amout of 1000 Dinars. would it be fare for me to return it as 1000 Dinars now knowiing that the value og dinar has Depreciated to its value today. I think not, there for part of the intrest i am getting is an amount that will insure keeping my money value updated to its current value and the other part is because of an agreement i did with the bank as a reward for placing and trusing the bank with my money in order to use it to finance other projects. on the subject of agreeing on a fixed profit, which assures my profit What is wrong with that. are u saying that in an islamic economy there is no such a thing as a sure profit. do i have to bare the chance of loosing in order to be islamic. I would love to listen to your opinions regarding the thoughts i just shred with u.
Wisdom Seeker

[Arabian Princess]

welcome to the sabla wisdom seeker, please continue to share your opinions here :)

Sorry wisdom seeker, but I dont agree with you. There is a differnce between Islamic bank (really practicing islamic banking) and any other commercial bank.
you claim that using banknotes is differnet than using gold coz banknotes are subject to inflation and change of rate. But I think so is gold! if we claim that Islam considres riba only in gold and other 4 iteams then we are saying that the islamic financial system is limited. Who is using gold and barter trade nowadays? I guess none or maybe rarly. That means riba does not exist nowadays??? why did the quran warned us many times from dealing with riba if it had only a limited use???
this is the way I see it, and I beleive that banknotes are money is simmiler to any other form of exchange iteam. Both are subject to ribais they are misused.
plus, some economists beleive that inflation is actualy the cause of intrest.
regarding why islamic banks are not active in Oman, well I dont know. Maybe no one is brave enough to open a REAL islamic bank because many of so called islamic banks are covering under the name but use more or less the same idea as commerical banks.

[Wisdom Seeker]

Gold is nothing like the banknotes we are using today. If u look at how many banknotes have disappeared with their governments and compare it to gold u will find the accumulative change in the price of gold, since god knows when, is nothing when compared to the banknotes. What guarantees the price of the banknotes is the government, but the gold is guaranteed be simply being gold. And when riba is only in 4 or 5 things this doesn't make the Islamic economy narrow rather than make it wide and adaptable to the changes in the world economy.

[IceTea]

Originally posted by Wisdom Seeker
.
I also would like to say that what we are using as money is not what the Islamic law says could have a rabawi dealings with. this is because this banknotes are ony concdred with a value as long as the government who issued it is available.
Riba can only be in 5 things and they are gold weat and another three things that i dont recall but they dont include the money we are using today.


The sentence which you said (in red) is dangarous, where did you get such wrong information from ??

[Arabian Princess]

Wisdom seeker,
we have to start with the whole concept again.
Why do you think riba is haram?
because it accumalates wealth on one section of the economy (the rich) and makes them use the need of the poor.

When a loan (with banknotes) have intrest on it, does it have the same charstirctic as riba??
When you charge 13% on a loan, that means you are paying 13% or even more from the real amout you took. Is the level of inflation the same? dont think so. People who need the money are forced to pay that money. Here the banks are using the need of those poor people (compared to the bank). No one would ever refuse to pay the same amount of money if he have the option.

[Muscati]

Interest has more components than just inflation. There's default risk, currency risk, tenor, cost of money and profit (among others).

[Arabian Princess]

True Mux,
but there is a theory by Hyman Minisky which studies the instability of the capitilist system. He explains it by saying that the capitalist economies usually produce goods through debts. In order to survive, the business must acquire assets (physical). To get those assets, more loans are to be taken. Managers are then to decide how much of the company's income should be cut inorder to pay those debts. He calls this "Margin of safty". He sees the problems of the capitlist economy many lies in this "margin of safty".

I know it is hard to explain something through a theory, but am just telling you that some economists beleive that the inflation and other problems in the capitlists system relies more in the intrest rate.

[6Sigma]

Theories! Theories! Theories! that's what the arabian mind has absorbed so far. Arabs are the best people in memorizing theories, but we don't seem to get anything working. Not even a bank that shadows the pracitces of the western world. My opinion, before we attempt to start an islamic bank, we should first establish the basic needs for an islamic enconomy. You can't just build up your institution or bank on a global economy and simply say, yes we are verticaly integrating our methods and transactions. It's just like getting parts made by Toyota, GM, Ford and making a car called ARABIA. Needless to dig in the economic and the business terms, and the relationship between their constraints, the questioin remains "where is our god **** infrastructure?"

[Ahmed Baloch]

salam all

I am ahmed baloch... a new member here... by profession i m a banker... now doing my masters in banking in australia..

I am working on a project........Marketing of Islamic banking products..

if u guys know any useful site regarding the marketing aspects of the islamic banking.. plz let me know.. tht would b a great help...

This is really a great challenge for islamic bankers to market their products... specially in this gloomy environment... where anything refering to islamic world is being considered suspicious and related to terrorism.....


regards

[Arabian Princess]

Well I tried looking through google for marketing Islamic banks but I couldnt find. But I guess the same articles that encourages Islamic banks could be used as marketing tools. One of the marketing startgies of Islamic banks is that it has the word "islamic" in its name.. coz that by itself attracts the muslim community who worry about other banks

[Man of principl]

This book will be of great benfit for all of you ..Enjoy the reading :wave:

http://www.islamicbanking.nl/chap4.html#_Toc3149098

[Ahmed Baloch]

salam

thanks Princess and M of P
...nice book.. i have already read his books brother...

Yea u r right... Princess.. the niche and target market for the islamic banks is actually islamic world actually.....

Its really interesting... islamic banking is a faith based system... can not run in isolation... the prerequisite condition is .. society should be honest... not corrupt.....

the biggest challenge for the islamic bankers is to remove .... misconceptions abt islamic banking...

it wud b a pleasure for me to share with u guys my findings once i finish my working...

thanks

[Arabian Princess]

Yes please do ..

I've heared many people not trusting Islamic banks because they think its no different than any other bank, but the number of these people are few and mostly who are aware of banking transactions in general .. the mass majority of muslims, think its safer to use islamic banks if avaliable.

[kristinthomas]

Islamic finance is more efficient in that it allocates funds can be invested at the base of the productivity of projects rather than the creditworthiness of those projects, as is the case in the traditional banking sector. Islamic finance is that the hose was the only alternative to the global downturn. Islamic banks are cautious when it comes to leverage their assets to invest in the capital as well.

[marthathomas01]

I have heard that many people do not trust the Islamic banks because I think its no different than any other bank, but the number of these people are few and, especially, who are aware of banking in general .. most of the mass of Muslims that its safer to use Islamic banks, if available.