11/21/07 Conference on Islamic Finance, May 19-22, 11/19/07 Muslims Prod PM for Interest-Free Banking,Telegraph, Calcutta, India. The Centre is being urged to introduce “interest-free” banking so that Muslims can organise savings and investments without falling foul of Shariat laws. The Shariat forbids earning and paying interest. The demand has come from Muslim MPs cutting across party lines. One group, led by K. Rahman Khan, deputy chairman of the Rajya Sabha and a chartered accountant, recently wrote to Prime Minister Manmohan Singh seeking a Shariat-compliant savings and investment system. They cited Malaysia’s Tabung Haji scheme and some forms of Islamic banking in the West as examples. Islamic Finance, Carnegie Council for Ethics in International Affairs
Sharia (in Arabic) or Shariat (in Turkish and Farsi) Finance seeks to achieve an "interest-free' economic system so that there is no conflict between business activity and the Quar-an. “Those who devour usury [lending money in return for interest] will not stand... Trade is like usury, but God hath permitted trade and forbidden usury”. (Quar-an 2:275) “O ye who believe! Fear God and give up what remains of your demand for usury if ye are indeed believers." (Quar-an 2:278-279) This goal is achieved by specialized banks and leasing companies. For example, under conventional western banking capitalism, a financial institution lends someone $20,000 over two years for a car 8% interest payable annually. So at the end of the first year, the borrower owes $21,600. At the end of the second year, the borrower owes $23,328. This amount would be payable monthly over two years. Under Sharia finance, the car might be leased for a fee of $23,328, payable monthly over two years, at the end of which the person leasing the car may keep it. The car is the same, the ownership is the same, monthly payments are the same but in one case the buyer pays interest whereas in the second case no interest is mentioned.