Do Islamic banks simply change labels of ‘interests’ to ‘profits’?

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In some cases, it is arguably the case that some Islamic banks clearly do this. For instance, with so called Islamic mortgages these banks do not fulfill the conditions of an instant contract and thus have effectively turned changed the phrase interest to rent.

One of the issues with interest is that the money is unearned/created out of nothing, so if an Islamic bank is not its investors returns based on profits from investment then it would be classified as interest I think

Could you explain this a bit further? I know Islamic mortgages is more complex and has more skeptics.

This is indeed a scary topic. I recall having dinner with a well known Islamic finance expert where he told me he had come across so many cases where there was a scholar backing a project or bank offering that was very clearly Haram but the person was turning a blind eye.

Promise this isn’t an uncle story :joy:

However I think to assume that by default all Islamic banks are doing this is actually hugely, hugely problematic.

It’s a major sin to assume such things without clear evidence and to generalise is to take this to another level

Therefore it really needs to be evaluated on a case by case basis

So the way this Ijara model works is as follows. A person places a deposit for a property. Let’s say 10% of the property’s value. The Islamic bank now owns 90%, each month the person buys a percentage of equity and pays rent on the percentage they do not own.

Now two issues arise here no.1 does the bank accept liability for damages? No.2 does the amount of rent paid decrease each month as equity is bought?

If the answer is no to any of the above issues then the contract is haram.

If no to no.1 then not a valid ijara contract.

If no to no.2 then that’s fixed rate interest.

I was told by a scholar who works at a well-known Islamic bank that the difference between an Islamic mortgage and a conventional mortgage is when starting one of them they said bismillah

Of course, I don’t think the OP was ever intended to mean that anyway. I believe it was a generic statement rather than a universal one.

Loooool that’s hilarious

Could you explain what you mean please?

Apologies to OP, didn’t intend to direct that at them. Rather intended it as a general reminder though I should’ve communicated that better

What are the conditions? I have had these conversations and studied it, but I don’t know the exact ruling on these guys, what part makes it haram?

I see, are these the only stipulations for it to be haram? is there more that I am missing, are the banks working with ijara?

LOL the disrespect, so… if he knows it is not halal, why does he work there? :sweat_smile:

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*ijara contract,

The condition being referred to here is being liable for damages.

I know right , crazy.

By doing a rental agreement (ijara) it actually needs to be a rental agreement.

Hahahahah you can’t be serious on this