Islamic Financial System - does it work?

[charlesl]

I live in Australia where our banks are notorious for robbing the public blind, as I'm sure they do elsewhere in the world. Most people view banks with considerable contempt here. I've tried to get a grasp of how the Islamic financial works by eliminating interest (usery). That said, I worked in Jeddah many years ago and got a car loan that had an extra amount tacked on to it that looked suspiciously like interest to me. However, I noticed the banks there didn't pay interest at the time. Don't know if it is still the case in Saudi Arabia, but I would expect they've tried to adhere to religious guidelines.

Question, can (or does) the Islamic banking system function in a way that is compatible with modern life? Is it viable? I suspect that many Islamic countries have been 'corrupted' by the same sort of corporate thieves we have here. Be interesting to find out how your cultures have coped against the secular financial onslaught.

[jamila]

dear charles,
I don't know the first thing about it, but try this link. It may lead you to others
www.islam.org.au/articles/older/BANKING.HTM
and
www.albalagh.net/Islamic_economics/finance.shtml
jamila

[charlesl]

Thanks Jamila, I had a look at those sites and the second one is a particularly good read. Sad to see though that there is no country sticking to Islamic finance guidelines according to the author. But I suppose we can always hope that it happens. The Islamic emphasis on equitable distribution of wealth in a market economy was fascinating. Anyway we await you folks coming down here and showing us how to do it the right way!

[Malcom]

Seems like there is something wrong with the word intrest, you can still loan money and make a profit as long as you don't call it intrest. According to above link for business it sounds like a version of the stock market. Charles do you have Credit Unions there? Work like banks but they are "owned" by it's members. Profits go back into the CU (thus it's members) insted of an investors pocket.
In US there are hunderds (maybe thousands) of credit unions, owned and operated by: Knights of Columbus, Steel workers, Vetrans ect. Can Muslims start their own Credit Union and run it without intrest? (Would make it a lot easyer to buy a home and get out of the "rent trap")

[Banu]

Charles

As for the interest paid at banks in Saudi Arabia, yes they are paying it but are calling them Commission instead of interest. It is nothing but interest. However some of them have other schemes which they claim are on Islamic principles, i.e., probably based on Mushariqa and Mudhariba system.