Salafi Islamic economics and a different definition of capitalism
September 13, 2019 2:03 PM   Subscribe

 
Both a good dense essay in itself and full of stuff to look up more of. Thanks.
posted by clew at 4:17 PM on September 13, 2019


I have a few non-Muslim friends get into Islamic Banking a decade ago, it's a huge captive market (nearly 2 billion Muslims who won't use secular banking) and one of the fastest growing demographics to boot.

For home loans - the majority of consumer lending by value - they get around the "prohibition of Riba (interest)" in almost all cases by simply having the bank buy the property and sell it back to you in smaller slices over time, at an "equivalized" interest rate. So it's interest in everything but name. Most Islamic finance providers here (like MCCA) even do away with the fiction and simply call it "rental rates" rather than "interest rates" and do direct comparisons against secular interest rates and the irony is that they do tend to be slightly more expensive due to lack of competition in the market, though the difference is not hugely significant. Basically you'd be comparing 2-3 providers against 20-30 other banks.

Reminds me a bit of how in Israel they get around the prohibition against "creating fire" on a Sabbath (which practically means you can't press buttons, because joining the electrified metal contacts may cause a spark, which is defined as fire) - for elevators, instead of calling for one to come to your floor, the elevators operate in automatic mode, where they constantly go to each floor sequentially and open / close so you can step in without hitting a button - constantly, all day. Also means that if you wanted to go to the 10th floor you'd have to stop at each and every floor starting from ground even if no one wanted to get in... the sheer waste of electricity is again ironic, given its (likely) original intentions.
posted by xdvesper at 5:59 PM on September 13, 2019 [11 favorites]


Though the trade-off for jizyah that such salafis don't talk about enough is that non-muslims aren't supposed to serve in the army if your administration institute jizyah, but of course if you do heed that then you don't get warm bodies or money...
posted by cendawanita at 4:44 AM on September 14, 2019 [2 favorites]


For home loans - the majority of consumer lending by value - they get around the "prohibition of Riba (interest)" in almost all cases by simply having the bank buy the property and sell it back to you in smaller slices over time, at an "equivalized" interest rate. So it's interest in everything but name.

So Malaysia is actually the global hub for Islamic banking, and iirc was the source of many modern innovative interpretations, so there's a lot of banking products available (and yea it's available to everyone regardless of background). Anyway, once I took on a personal loan (with a Saudi bank actually, operating here), and one of the innovation is how akad/aqad is done. (Akad is like a verbal contract, and probably due to historical reasons, a conservative/fundie thinking is no transaction until an akad is conducted, eg there are Sunnis of the Shafie school who will say a transaction at the counter with the cash register is still not sufficient unless both parties verbalise the whole exchange*)

So anyway, since there is no 'interest', what happened is that I'm supposedly buying tins of milk from the bank, and then I agreed for then to buy it back but then there's the difference etc etc and I'm paying it off in installments. But it was quite a route, I still can't remember how it was even cans of powdered milk in the first place.

*Japan will have no problems with this approach
posted by cendawanita at 5:03 AM on September 14, 2019 [5 favorites]


So it's interest in everything but name.

For some deals that may be true. But my understanding is that in a typical murabahah mortgage there’s no way to change the interest rate on you, or to charge interest on arrears. That means you know at the outset what you’ll pay, and the risk of a spiral of debt growing out of compound interest is removed. A fairer apportionment of risk between lender and borrower, in fact.

I appreciate that there are several different forms of Islamic mortgage and I’m not an expert on any of them, so I might have a distorted impression.
posted by Segundus at 8:43 AM on September 14, 2019 [3 favorites]


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