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Is it ok to work in Islamic banking related Jobs ?

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  • muzzybee
    replied
    Re: Is it ok to work in Islamic banking related Jobs ?

    Originally posted by oshirowanen View Post
    It's more to do with sharing the risk level.

    If I was on the receiving end of an Ijara and Musharaka contract, I would personally find this less risky because it means (right from day 1) I am part owner of the property and because it shares the risk more than the Murahaba concept. However, having said that. Banks do prefer Murabaha more to be honest, But islamically, it seems that Musharaka (joint ventures) are preferred. Islam puts a lot of emphasis on community, and a joint venture is exactly that. All islamic financial concepts have their own personal good points about them. Murabaha concepts has most of the risk 1 sided.
    Oh ok Jazakallah khairan.

    Leave a comment:


  • oshirowanen
    replied
    Re: Is it ok to work in Islamic banking related Jobs ?

    Originally posted by muzzybee View Post
    Is this less risk because of the leasing factor.
    It's more to do with sharing the risk level.

    If I was on the receiving end of an Ijara and Musharaka contract, I would personally find this less risky because it means (right from day 1) I am part owner of the property and because it shares the risk more than the Murahaba concept. However, having said that. Banks do prefer Murabaha more to be honest, But islamically, it seems that Musharaka (joint ventures) are preferred. Islam puts a lot of emphasis on community, and a joint venture is exactly that. All islamic financial concepts have their own personal good points about them. Murabaha concepts has most of the risk 1 sided.
    Last edited by oshirowanen; 14-04-14, 01:58 PM.

    Leave a comment:


  • muzzybee
    replied
    Re: Is it ok to work in Islamic banking related Jobs ?

    Originally posted by oshirowanen View Post
    Murabaha is the simplest to understand, but it's more difficult to offer as a product. You have to be very very very rich to be able to be an investor who offers Murabaha. Plus the buyer here will most likely have to make much bigger monthly payments. This is because of the risk factor, the investor will most likely want his/her money back faster, which means less time to pay, which means bigger payments. Here the investor doesn't really make a profit until right at the end. Kind of risky as you can imagine if the buyer dies for example.

    Ijara and Musharaka may be more difficult to understand and setup, but the end result is that investors are not in as much risk (risk still exists, but it's less), which means they are more willing to spread the payments over longer periods of times. Here the investor starts making a profit right away.
    Is this less risk because of the leasing factor.

    Leave a comment:


  • oshirowanen
    replied
    Re: Is it ok to work in Islamic banking related Jobs ?

    Originally posted by muzzybee View Post
    So ,why would people go for the Ijara concept if Murabaha is the simplest , Does it involve a higher deposit.
    I mean end of the Day Buying is easier than Leasing right.
    Ijara is not the same as Murabaha, So you can't buy a house from an investor using Ijara techniques.

    Murahaba is buying something from an investor at a higher price than the investor paid for it
    Ijara is leasing out something you own
    Musharaka is a joint venture.

    Murabaha is the simplest to understand, but it's more difficult to offer as a product. You have to be very very very rich to be able to be an investor who offers Murabaha. Plus the buyer here will most likely have to make much bigger monthly payments. This is because of the risk factor, the investor will most likely want his/her money back faster, which means less time to pay, which means bigger payments. Here the investor doesn't really make a profit until right at the end. Kind of risky as you can imagine if the buyer dies for example.

    Ijara and Musharaka may be more difficult to understand and setup, but the end result is that investors are not in as much risk (risk still exists, but it's less), which means they are more willing to spread the payments over longer periods of times. Here the investor starts making a profit right away.
    Last edited by oshirowanen; 14-04-14, 01:27 PM.

    Leave a comment:


  • Mockingjay
    replied
    Re: Is it ok to work in Islamic banking related Jobs ?

    Originally posted by oshirowanen View Post
    As far as I understand, there are about 6 financial techniques in islam which are accepted and permissible.

    You mentioned 1 of them which is:

    1. Murabaha (this is probably the simplest of the 6): Asset purchased by the bank and sold on to the customer with an agreed mark-up.
    You said the same thing in your post, just different words. As in an investor buys a house for 200k, and sells it to you for 220k via monthly payments over say 25 years, or even as a single payment. 20k profit, not interest, kind of like buying a banana for $1 and selling it for $1.20. Just on a bigger scale.

    The bank I use uses another 2 techniques out of the 6 which are:

    2. Ijara: Asset purchased by the bank and leased to the customer over a specified period.
    This is basically the same as me buying a house and putting in on rent.

    3. Musharaka: Investment partnership in which profit sharing terms are agreed in advance and losses are attributable to the sum invested. Similar to a joint venture agreement.
    I explained this one above.

    The remaining 3 are:

    4. Sukuk: Islamic type of bond representing the ownership by the Sukuk holders in the underlying asset;
    I'm not sure how this one works

    5. Mudaraba: Partnership financing contract under which one party provides the labour whilst the other provides the capital;
    This is self explanatory.

    6. Takaful: Mutual insurance.
    Believe it or not, insurance is actually possible islamically (not exactly the same as western insurance). It basically involves a group of people who keep money in a pot (doesn't have to be in a pot literally). Then when something happens, the money in the pot is used to help one of the members out. Kind of like a group of people putting money aside in a pot if the worst were to happen.

    I don't know of any others. let me know what you're Ustad says about all these. It will be interesting to see what Ustad's from other countries views are and how and if they differ.
    Actually if all those Islamic concepts is implemented by non bank organization (non financing institution) will be pretty much fine. But what's doubtful is caused it says "bank".

    But will look into this more :insha:

    Leave a comment:


  • muzzybee
    replied
    Re: Is it ok to work in Islamic banking related Jobs ?

    Originally posted by oshirowanen View Post
    As far as I understand, there are about 6 financial techniques which are accepted and permissible.

    You mentioned 1 of them which is:

    1. Murabaha (this is probably the simplest of the 6): Asset purchased by the bank and sold on to the customer with an agreed mark-up.
    You said the same thing in your post, just different words.

    The bank I use uses another 2 techniques out of the 6 which are:

    2. Ijara: Asset purchased by the bank and leased to the customer over a specified period.
    This is basically the same as me buying a house and putting in on rent.

    3. Musharaka: Investment partnership in which profit sharing terms are agreed in advance and losses are attributable to the sum invested. Similar to a joint venture agreement.
    I explained this one above.

    The remaining 3 are:

    4. Sukuk: Islamic type of bond representing the ownership by the Sukuk holders in the underlying asset;

    5. Mudaraba: Partnership financing contract under which one party provides the labour whilst the other provides the capital;

    6. Takaful: Mutual insurance.

    I don't know of any others.
    So ,why would people go for the Ijara concept if Murabaha is the simplest , Does it involve a higher deposit.
    I mean end of the Day Buying is easier than Leasing right.

    Leave a comment:


  • oshirowanen
    replied
    Re: Is it ok to work in Islamic banking related Jobs ?

    Originally posted by Mockingjay View Post
    Will look into this Ijara concept and consult to my ustad :insha:

    So far I only have the halal concept of buying house is through murabaha. But will look into this again.

    :jkk:
    As far as I understand, there are about 6 financial techniques in islam which are accepted and permissible.

    You mentioned 1 of them which is:

    1. Murabaha (this is probably the simplest of the 6): Asset purchased by the bank and sold on to the customer with an agreed mark-up.
    You said the same thing in your post, just different words. As in an investor buys a house for 200k, and sells it to you for 220k via monthly payments over say 25 years, or even as a single payment. 20k profit, not interest, kind of like buying a banana for $1 and selling it for $1.20. Just on a bigger scale.

    The bank I use uses another 2 techniques out of the 6 which are:

    2. Ijara: Asset purchased by the bank and leased to the customer over a specified period.
    This is basically the same as me buying a house and putting in on rent.

    3. Musharaka: Investment partnership in which profit sharing terms are agreed in advance and losses are attributable to the sum invested. Similar to a joint venture agreement.
    I explained this one above.

    The remaining 3 are:

    4. Sukuk: Islamic type of bond representing the ownership by the Sukuk holders in the underlying asset;
    I'm not sure how this one works

    5. Mudaraba: Partnership financing contract under which one party provides the labour whilst the other provides the capital;
    This is self explanatory.

    6. Takaful: Mutual insurance.
    Believe it or not, insurance is actually possible islamically (not exactly the same as western insurance). It basically involves a group of people who keep money in a pot (doesn't have to be in a pot literally). Then when something happens, the money in the pot is used to help one of the members out. Kind of like a group of people putting money aside in a pot if the worst were to happen.

    I don't know of any others. let me know what you're Ustad says about all these. It will be interesting to see what Ustad's from other countries views are and how and if they differ.
    Last edited by oshirowanen; 14-04-14, 01:08 PM.

    Leave a comment:


  • Mockingjay
    replied
    Re: Is it ok to work in Islamic banking related Jobs ?

    Originally posted by oshirowanen View Post
    It's a joint venture, so both you and the bank own their respective percentages of the house. They will be the leading partner in the venture until 100% of the property is owned by you. I've made some changes to my post, as I should not have used the word "loan". Technically, they do not give you a loan, even though it can seem like a loan to people who can't get standard "mortgages" out of their minds.
    Will look into this Ijara concept and consult to my ustad :insha:

    So far I only have the halal concept of buying house is through murabaha. But will look into this again.

    :jkk:

    Leave a comment:


  • oshirowanen
    replied
    Re: Is it ok to work in Islamic banking related Jobs ?

    Originally posted by Mockingjay View Post
    My question would be, does the bank own 100% of the house? I mean they hold the certificate, etc.? Or it's the developer (a landlord) who owns the house?
    It's a joint venture, so both you and the bank own their respective percentages of the house. They will be the leading partner (as for obvious reasons, they will have a lot more financial power than you) in the venture until 100% of the property is owned by you. I've made some changes to my post, as I should not have used the word "loan". Technically, they do not give you a loan, even though it can seem like a loan to people who can't get standard "mortgages" out of their minds.

    So just say you're the bank, and I want to buy a house, but can't afford to pay for it all. I team up with you, you pay 50% and I pay 50%. We both own the house now 50/50. I live in the house, and pay you rent for the 50% you own, and I slowly/monthly buy your 50% of the house until I have 100%. You get your 50% investment back intact, and you make a profit for investing in property. And I end up with a house I own fully which I wouldn't have been able to pay for 100% upfront, and I didn't pay interest.

    These percentages can start off anywhere, but the bank would generally want you to buy 25% upfront minimum.
    Last edited by oshirowanen; 14-04-14, 12:47 PM.

    Leave a comment:


  • Mockingjay
    replied
    Re: Is it ok to work in Islamic banking related Jobs ?

    Originally posted by oshirowanen View Post
    In terms of the loan for a house, if they loan you 100k for example, you only pay back 100k. This is the Musharaka bit where you enter a joint venture with the bank to buy a house. If the house is 200k for example, and you get a loan for 100k, that means the bank owns 50% of the house and you own the other 50%.

    So the bank doesn't make a profit from the loan (so no interest). They make the profit from the Ijara section, where they will lease out the 50% of the house to you which they own as you will be using their 50% of the house plus your 50% of the house, so it's only natural for pay rent for the 50% of the house you do not own yet. So if the rent is say 1k a month, as you already own 50% of the house, your rent will be about 0.5k a month (as you don't pay rent for the 50% you already own, you only pay rent on the 50% you do not own) plus a certain percentage which goes towards buying further shares of the property every month, which slowly pays off the 100k loan, interest free, and the bank makes it's profit from the rent payments you give them for using their 50% of the property.



    I understand how Murabaha works which is offered by the 9 Salafi Ustad's you have referred to. I just wanted to know how to contact them, as I know Murabaha is a nice concept, so is Musharaka and so is Ijara.
    My question would be, does the bank own 100% of the house? I mean they hold the certificate, etc.? Or it's the developer (a landlord) who owns the house?

    Leave a comment:


  • Mockingjay
    replied
    Re: Is it ok to work in Islamic banking related Jobs ?

    Originally posted by muzzybee View Post
    Thanks for your input.

    So i came across this article in the general sense this is what islamic banks do.

    How do the banks make money?
    Banks can profit from the buying and selling of approved goods and services. The principal means of Islamic finance are based on trading, and it is essential that risk be involved in any trading activity, so banks and financial institutions will trade in sharia-compliant investments with the money deposited by customers, sharing the risks and the profits between them.

    Islamic banks are structured so that they retain a clearly differentiated status between shareholders' capital and clients' deposits in order to make sure profits are shared correctly.

    Although they cannot charge interest, the banks can profit from helping customers to purchase a property using a ijara or murabaha scheme. With an ijara scheme the bank makes money by charging the customer rent; with a murabaha scheme, a price is agreed at the outset which is more than the market value. This profit is deemed to be a reward for the risk that is assumed by the bank.
    There are firm laws governing the types of businesses with which the banks can trade. There should be absolutely no investment in unsuitable businesses, including those involved with armaments, pork, tobacco, drugs, alcohol or pornography.

    http://www.theguardian.com/money/201...money-interest
    If it really comes with that scene that is really fine. But most of the Islamic banks I know (in my country) still provide loans to the customers. It may be a little but still it contains riba.

    Wallahu a'lam

    Leave a comment:


  • oshirowanen
    replied
    Re: Is it ok to work in Islamic banking related Jobs ?

    Originally posted by Mockingjay View Post
    Can you explain how the loan without interest works? I mean can you explain how much the figure you borrow and how much you will need to pay back to them?
    I should have made this bit clear, they don't actually offer a loan, even though people do confuse them for loans. They basically buy the house with you in a joint venture

    In terms of you needing more money to buy a house, if they give 100k for example, you only pay back 100k. This is the Musharaka bit where you enter a joint venture with the bank to buy a house. If the house is 200k for example, and they give 100k, that means the bank owns 50% of the house and you own the other 50%.

    So the bank doesn't make a profit from a loan (so no interest). They make the profit from the Ijara section, where they will lease out the 50% of the house to you which they own as you will be using their 50% of the house plus your 50% of the house, so it's only natural for pay rent for the 50% of the house you do not own yet. So if the rent is say 1k a month, as you already own 50% of the house, your rent will be about 0.5k a month (as you don't pay rent for the 50% you already own, you only pay rent on the 50% you do not own) plus a certain percentage which goes towards buying further shares of the property every month, which slowly buys back the 100k they own, again, no interest, and the bank makes it's profit from the rent payments you give them for using their 50% of the property.

    So I should not have mentioned the word "loan" anywhere, as Musharaka and Ijara principles do not include loans anywhere, hence no interest is possible.

    Originally posted by Mockingjay View Post
    I could give you the details but it's in other language but I can explain how it works. The organization I mention do not provide loan at all. But they provide installments for muslims, like for buying house, cars, etc. So, literally they do buying and selling (in installment). Which is THIS is what muslim needs today!
    I understand how Murabaha works which is offered by the 9 Salafi Ustad's you have referred to. I just wanted to know how to contact them, as I know Murabaha is a nice concept, so is Musharaka and so is Ijara.
    Last edited by oshirowanen; 14-04-14, 12:29 PM.

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  • Mockingjay
    replied
    Re: Is it ok to work in Islamic banking related Jobs ?

    Originally posted by oshirowanen View Post
    The islamic banks I use do not charge interest at all on loans. They invest in islamic shares, islamic funds, and make profit from rent and not interest, where they use Ijara for rent purposes and Musharaka for partnership purposes.

    Do you have details of the 9 Salafi Ustads?
    Can you explain how the loan without interest works? I mean can you explain how much the figure you borrow and how much you will need to pay back to them?

    I could give you the details but it's in other language but I can explain how it works. The organization I mention do not provide loan at all. But they provide installments for muslims, like for buying house, cars, etc. So, literally they do buying and selling (in installment). Which is THIS is what muslim needs today!

    Leave a comment:


  • muzzybee
    replied
    Re: Is it ok to work in Islamic banking related Jobs ?

    Originally posted by Mockingjay View Post
    If you ask me, I will say no. The issue of Islamic bank today is still having a grey area today. At least there is still a little percentage of interest accrued.

    What does exactly a bank do?

    Bank will keep our money and invest it and give us profit. How do they invest? By providing loans to customers. How do they get the profit? From the additional amount paid by customers. What is this additional amount? Interest (riba). What if those banks just give loan and no interest? Well they'll go bankrupt of course.

    That's bank. Wherever it is whatever it's called.

    How can muslims change this?

    Don't give loans. Period. Do murabaha.

    What's murabaha?

    Definition of 'Murabaha'

    An Islamic financing structure, where an intermediary buys a property with free and clear title to it. The intermediary and prospective buyer then agree upon a sale price (including an agreed upon profit for the intermediary) that can be made through a series of installments, or as a lump sum payment.

    I read somewhere that there are muslims who start this kind of business. Esp. in mortgage. There are 9 salafi ustads who build an organization that gives free interest house installment. So, they buy a house and sell it to other muslims with certain sale price and with installment. That's how they get the profit. We need more angel investors like this.

    Wallahu a'lam.
    Thanks for your input.

    So i came across this article in the general sense this is what islamic banks do.

    How do the banks make money?
    Banks can profit from the buying and selling of approved goods and services. The principal means of Islamic finance are based on trading, and it is essential that risk be involved in any trading activity, so banks and financial institutions will trade in sharia-compliant investments with the money deposited by customers, sharing the risks and the profits between them.

    Islamic banks are structured so that they retain a clearly differentiated status between shareholders' capital and clients' deposits in order to make sure profits are shared correctly.

    Although they cannot charge interest, the banks can profit from helping customers to purchase a property using a ijara or murabaha scheme. With an ijara scheme the bank makes money by charging the customer rent; with a murabaha scheme, a price is agreed at the outset which is more than the market value. This profit is deemed to be a reward for the risk that is assumed by the bank.
    There are firm laws governing the types of businesses with which the banks can trade. There should be absolutely no investment in unsuitable businesses, including those involved with armaments, pork, tobacco, drugs, alcohol or pornography.

    http://www.theguardian.com/money/201...money-interest

    Leave a comment:


  • oshirowanen
    replied
    Re: Is it ok to work in Islamic banking related Jobs ?

    Originally posted by Mockingjay View Post
    If you ask me, I will say no. The issue of Islamic bank today is still having a grey area today. At least there is still a little percentage of interest accrued.

    What does exactly a bank do?

    Bank will keep our money and invest it and give us profit. How do they invest? By providing loans to customers. How do they get the profit? From the additional amount paid by customers. What is this additional amount? Interest (riba). What if those banks just give loan and no interest? Well they'll go bankrupt of course.

    That's bank. Wherever it is whatever it's called.

    How can muslims change this?

    Don't give loans. Period. Do murabaha.

    What's murabaha?

    Definition of 'Murabaha'

    An Islamic financing structure, where an intermediary buys a property with free and clear title to it. The intermediary and prospective buyer then agree upon a sale price (including an agreed upon profit for the intermediary) that can be made through a series of installments, or as a lump sum payment.

    I read somewhere that there are muslims who start this kind of business. Esp. in mortgage. There are 9 salafi ustads who build an organization that gives free interest house installment. So, they buy a house and sell it to other muslims with certain sale price and with installment. That's how they get the profit. We need more angel investors like this.

    Wallahu a'lam.
    The islamic banks I use do not charge interest at all on financing. They invest in islamic approved shares, islamic approved funds, properties, and make profit from rent and not interest, where they use Ijara for rent purposes and Musharaka for partnership/financing purposes.

    Do you have details of the 9 Salafi Ustads?
    Last edited by oshirowanen; 14-04-14, 12:38 PM.

    Leave a comment:

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