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Creative Islamic Banking - Replacing Interest with Profit

Reader comment on item: The Religious Roots of Turkey's Currency Crisis
in response to reader comment: A Penny Saved is a Penny Earned

Submitted by Robert (United States), Jan 1, 2022 at 16:18

Dear (Reader) Renox,

Your Link was very informational, and it confirmed what I suspected.

I hope Dr. Daniel Pipes reads this very brief posted (1 page) article (whether or not he studied business, finance ot banking at Harvard). The concept of Profit is very simple - a merchant buys something, holds and transports it, and sells it for a price. Mohammad was a merchant. Here is how it sometimes works in Saudi Arabia:

(1) You wish to buy a car, but have not enough money to do so. So the "Bank" buys it for you, and holds Title to it. When you have paid the "Bank" back some time later, the "Bank" simply charges you a higher price. And that is "Profit" and not "interest." This clearly sounds that its no different than creative Western Bookkeeping in order to avoid higher Taxes.

(2) You want to keep your money Safe and maybe even Invest so you can make a Profit. So you put your Money in a "Bank". This "Bank" then invests you money in some Enterprise or Commercial Activity at Home or Overseas. When you wish to make a Withdrawal the "Bank" pays you the Profit of the Business of which you were a "Partner." This actually reminds me of the East India Company in the history of Europe. It also reminds me of the American Colonies which the British Empire created Colonies with the Granting of Charters. The Investments were not mere Loans; rather they were huge commercial enterprises for for the Home-country Businessmen, who were fundamentally Merchants engaged in Shipping and Trade.

So I think that Dr. Daniel Pipes is too Harsh in criticizing Islamic Banking; after all, in the West, all Banks engage in close commercial enterprises which involves Entrepreneurial Risk; in that regard, the Muslim Camel Merchant also Risked his Caravan during its Journey. knowing what I know about Western Commerce and Financing in History, especially during the Industrial Revolution, I think Islam has evolved well on the issue of Financing large business ventures. In the (Western) Middle Ages Christianity also prohibited Interest on money loans - this is where the Jew became useful - it was Jews who loaned Christian Princes Money on the basis of Interests (the Jew not being prohibited from lending money on interest to a non-Jew).

It was around the time of the Renaissance, in Northern Italy, Lombardy, where the First Christian Banking began. So the so-called Money-changing activity of the Jews became Respectable (Christian) Banking. But Anti-Semitism merely observed the success of the Rothschild Banking establishment during and after the French Revolution.

Also, around the time of the Rothschild's success, one should note the difficulty with which USA Founding Father Alexander Hamilton in establishing a National Bank; this of course is related to the Bank Note, and Commercial Paper, particularly the subsequent Paper Dollar, which replaced the Gold Dollar and later Silver Dollar. I still remember when a USA Silver Dollar Bill was a promise to replace it by the Treasury Department which a Dollar's Worth of Silver.

In brief, to understand and appreciate how many modern Muslim States modernized their Financial Practices, one needs to know what happened among the Jewish and Christian Peoples historically wherever they engaged in business activity which required (small or large amounts of) Money, or its Borrowing, Loans thereof.

Submitting....

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Reader comments (27) on this item

Title Commenter Date Thread
Extra: "Turkey's Erdogan says he will visit Saudi Arabia in February" [209 words]
w/response from Daniel Pipes
RobertJan 3, 2022 16:00277965
Seeking Restoration Away From Western Influences - Turkiye's Battle for Significance [149 words]M ToveyJan 6, 2022 12:34277965
1If Turkey's Islamic fiscal policy is sinking its currency, why didn't that happen to past Islamic societies? [48 words]
w/response from Daniel Pipes
MR MathewsJan 1, 2022 17:13277935
1Islamic Banking Began in Pakistan in the 1950's. [501 words]RobertJan 2, 2022 18:35277935
Islamic Commerce Not Confined to Caravans Anymore [87 words]M ToveyJan 3, 2022 10:24277935
1Central or National Banking in Turkey Under Erdogan [237 words]RobertJan 3, 2022 13:03277935
Points of Interest In Islamic Banking [105 words]M ToveyJan 3, 2022 17:18277935
Agree with M Tovey but I want to add something. [149 words]PrashantJan 4, 2022 16:48277935
Further Proposition of World Finance Models Competition When Coorperation is Indicated [256 words]M ToveyJan 5, 2022 11:02277935
Trade Deficit Is the Last Fundamental Problem [338 words]
w/response from Daniel Pipes
David RyanDec 31, 2021 00:28277901
Tentacles of Turkey's Lost Secularism are Hard to Sever [141 words]M ToveyDec 31, 2021 17:20277901
1Erdogan's Internation Isolation and "Dialectical" Recent Change [506 words]RobertJan 1, 2022 13:18277901
2Interest vs. Profit [101 words]
w/response from Daniel Pipes
RobertDec 30, 2021 11:06277876
1Interest is the cost of money. [33 words]PrashantDec 30, 2021 15:02277876
1Infation and It's Cost [215 words]RobertDec 31, 2021 09:16277876
2A Penny Saved is a Penny Earned [80 words]RenoxJan 1, 2022 11:49277876
1Creative Islamic Banking - Replacing Interest with Profit [556 words]RobertJan 1, 2022 16:18277876
1Sharia makes did not understand how money works [177 words]PrashantJan 1, 2022 17:18277876
Middle East Finances Governed by Ancient Rules - Prohibited Under Religious Precepts [126 words]M ToveyJan 1, 2022 17:43277876
1Alexis de Tocqueville and Turkey [241 words]
w/response from Daniel Pipes
DaveDec 30, 2021 07:42277873
1Insightful response [62 words]PrashantDec 30, 2021 17:42277873
1Charles-Louis de Secondat, Baron de La Brède et de Montesquieu and American Exceptionalism [463 words]RobertDec 31, 2021 10:30277873
Liberal Democracy is often not realistic [239 words]DaveJan 3, 2022 10:31277873
Prerequisites of democracy [85 words]JeffJan 3, 2022 18:45277873
Certain choices must be withdrawn from Muslims [202 words]PrashantJan 4, 2022 11:28277873
What would be a "reasonable" interest rate in a country with a 21% inflation rate? [27 words]
w/response from Daniel Pipes
Lan AstaslemDec 29, 2021 23:33277860
Mr. Erdoğan's "What Our Religion Tells Us" - Unique Unto Himself [230 words]M ToveyDec 29, 2021 21:11277858

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