AN ANSWER TO A COMMON MISCONCEPTION ABOUT ISLAMIC BANKING

Being a Sharia Scholar and Islamic Banking Professional, I usually speak about the subject topic at different forums including training courses and seminars. Many people ask different questions and express their concerns about Interest Free Banking and Sharia Compliant Products of Islamic Banks. The main purpose of writing this article is to express what I have learned from various questions and objections about Islamic Banking.

General and common objections on Islamic banking are sometimes based on a major misunderstanding. It is very common that sometimes by looking at two seemingly identical (same) issues, things or results, and then comparing one to another, It is assumed that there is no differences in the reality and details of these two matters or things and both are the same.

Regardless of the case, a common example of this misunderstanding is just like suppose you have two chicken burgers in front of you, both with the same taste, aroma, size, price, and name. There is a similarity in everything, but chicken is Halal in one burger and Haraam in another. Apparently the finished products are same. Now, if an ordinary person wants to know which burger is halal and which is haram, it is not possible to decide just by looking at the burgers. In order to make a decision, it will be necessary to look at all the stages of preparation of the burger, especially the noticeable and critical steps, for example, whether the chicken was slaughtered according to the Shariah rules? The name of Allah was taken while slaughtering? Who was the slaughterer and so on. If all these stages are not in view, then an ordinary person will either consider both of them as halal or both of them as haram or he will draw a baseless conclusion.

As far as financial matters are concerned, we also find examples of two seemingly the same but different transactions. For example, we all know that in the light of authentic Ahadith on Riba Al-Fadl (Interest), it is necessary in the exchange of homogeneous goods that both counter values must be exchanged in equal quantity. If dates are to be exchanged for dates, a basic condition is that the quantity on both sides must be equal. By keeping this rule in mind, look at another hadith; the dates of Khyber were presented to the Prophet (peace and blessings of Allaah be upon him), and it was said that we exchange two saa' (???)of ordinary dates (saa' is a measurement scale) with one saa' of this date (of Khyber) or three saa' of ordinary dates with two saa' of Khyber . The Prophet (peace and blessings of Allaah be upon him) forbade this (because it is Riba) and said: Sell ordinary dates for dirhams and buy Khyber dates for the dirhams you get. (For details, see Bukhari, Kitab al-Buyou ', Hadith 2089).

See, the result is same, but the procedure and process of the transaction has changed. Now, if one says that these two matters are the same, it would be considered as the false conclusion.

Another example of this could be that, for example I have Rs. 100 and I have to earn Rs. 10 on that 100 Rupees. One way to do this is to lend Rs. 100 to someone with the condition that I will receive Rs. 110 from the debtor after one month. This Rs. 10 will definitely be interest due to the conditional excess on the loan which is Haram. The second way is to buy something for Rs. 100 and sell it in the market for Rs. 110. Now this Rs. 10 earned through trade is halal profit, which is permissible.

The results of the two transactions are same, the benefit of Rs. 10 is on both sides, but there is a huge difference between both of them. Because profit earned through loan is interest while profit earned through trade is Halal.

Thus, there are similar differences between the interest rate of a conventional bank and the profit of a interest free bank, the penalty of a conventional bank and the charity of an Islamic bank, and so on.

In short, make an assumption by looking at the same results without going into the details of two seemingly the same things may be valid in other fields, to some degree, but at least in Islamic finance, it is not justifiable. Especially when it comes to an important and delicate subject like Islamic Financial jurisprudence (or Islamic banking), it is important to know the basis of the transaction, its stages, steps and components and to understand the difference between two seemingly the same transactions. And there must be two ways to understand this subtle difference, either by relying on the experts or by learning the art itself so that it is possible to differentiate and form an opinion on a valid basis.

May Allah guide us all. Amen

Muhammad Muaz Ashraf