The underlying principle of conventional banking system is to make more money and not to make more good actions. However the underlying principle of a true Islamic banking system is to make more good actions than to make more money. Allah loves good actions and not money and similarly all believers love good actions and not money. All the non-Muslims and Muslims who have not become believers also love money and love to make more money. However the underlying principle of true Islamic banking system is to have more good actions than to have more money. True Islamic banks must be established in order to help both Muslims and non-Muslims to have their needs fulfilled and not to make more money out of the weakness of others. Islamic banks should be doing more good actions than to make more money. By lowering the profit margin to the maximum of 10% of the cost price, Islamic banks will be able to help many peoples to obtain their needs. Allah loves those who help others and Allah does not love those who exploit others. Because of this, Allah has forbidden any form of riba or interest in our business transaction. With the involvement of riba or interest in our business transaction the rich will exploit the poor and the needy. In the societies that practice riba or interest the rich become richer and the poor become poorer.
One other most important facility that conventional banks are offering is providing loans to those who wanted to do business but not having sufficient money to start their business. Conventional banks will provide loans facility to them with certain percentage of interest and the loans are to be paid back with monthly installment of certain amount of money for a certain number of years. Giving loans with interest is not the principle of Islamic banks. Islamic banks are not allowed to give loans with interest but Islamic banks are allowed to do business on profit sharing with others. Conventional banks obtain money from the interest or riba on the loans which is forbidden in Islam but Islamic banks obtain money through profit sharing with others. Muslims are not allowed to loans money with interest to others. Allah forbids Muslims from involving themselves in businesses involving riba or interest. Muslims are not allowed, even to eat a morsel of food which is obtained with the money associated with riba or Interest. As Muslims are not allowed to drink liquor, Muslims are also not allowed to associate themselves with any activities associated with liquor. Similarly Muslims are not allowed to charge interest on money they loan to others and Muslims are also not allowed to earn their living in banks which are associated with riba or interest.
Muslims are allowed to give loans to others provided there is no interest or riba involve. Allah loves those who love to give loans to others without interest. Those persons who loans their money to others without interest are continually drawing rewards from Allah, as long as the loans are not yet being paid to them. Allah loves the persons who help others by giving loans without interest and Allah does not loves the person who gives loans to others with interest or riba. There are many Muslims who want to do business and yet there are no banks which can give loans without interest. Muslims must only deals with banks that give those loans without interest. Is there any bank that can give loans without interest? There is none in this world. Some may wonder, how a bank can survive if the banks are to give loans without interest? I am sure there are many Muslims who do not believe that banks can flourish even better when banks do give loans to others without interest. Banks does not have to give loans to others with interest but banks can do business with others and obtain profit from the business. Giving loans to others with interest is not the only way for the banks to earn money. One other way for the banks to earn money is by having business partnership with others. There are many who have the expertise to do a business but they do not have money to start the business. Islamic banks can have partnership with those who have businesses that the banks believe will gives them a good return. In this case, the Islamic bank will own fully or 100% the business as the bank provides all the money to start the business. Initially the one who has the expertise will become the workers and as the workers buy the share of the business, soon they will also become the shareholders. In Islam the profit of the business is shared between the owner and the workers.
Beside salaries the workers would have a share of about 2/3 of the total profit and the owner and the government will have a share of about 1/3 of the total profit. All the workers of the business are allowed to buy shares of the business from the bank and become shareholders or owners of the business. As the business grows the banks will have the choice of either maintaining the ownership of the business or to sells all the shares to the workers. In my opinion, and it is more Islamic ,once the banks have gained more than the money, the bank has injected initially as the capital of the business, a good ethical practice of the bank is to sell all the shares to the workers. In this way, the Islamic banks are helping either Muslims or non-Muslims to become successful entrepreneurs in this country. Muslims in all over the world are waiting for such Islamic banks to exist in this world. One of the very important reasons why Muslims in all over the world are reluctant to do business is because in today’s world, Muslims have no choice but to use the facilities of banks which are in principles are not Islamic. Nowadays many Muslims are forced to do business with banks which are not Islamic and it has become fardu Kifayah for Muslims to set up banks in this world with a truly Islamic principles.
With smart partnership both the Islamic banks and the workers have equal responsibility to make the business a success. Both banks and the workers will equally suffer if the business fails. Banks should not only gives loans and obtain money from interest as done by the conventional banks in all over the world but both the banks and the workers must have equal responsibility to make the business a success. Because both the banks and the workers have shares in the profit of the business, both the banks and workers must work hard in order for the business to grow and start making profit. With the principle of sharing profits between the banks as owners and the workers, both the banks as owner and the workers will have equal responsibility to make the business, a success. As the business grows and starts making profits both the banks as owners and the workers will have benefits as both have shares in the profit of the business. Both the banks as owners and the workers will be happy and are at peace with each other when the businesses are making profit. As the profit of the business grows and multiply, the banks may obtain even more money than the conventional banks. With healthy business partnership Islamic banks can help many to grow to become a successful businessman and businesswomen. In this way, many including the non-Muslims will be happy and willing to have business partnership with Islamic banks. With the grace of Allah, when the bank follows the true principles of Islam, it will grow to become one of the biggest banks in the world. When the banks are able to create peaceful relationship with their clients, then the banks are truly Islamic bank. I believe in no time, the banks that operate with the true principles of Islam will soon replace all the banks in this world which are not Islamic. Islam means peace and a true Islamic banks will emanate peace to their clients.
Banks are owned by some peoples who acted as the main shareholders of the banks. Nowadays the workers of the bank are not the shareholders of the banks. In Islam, workers are encouraged to become shareholders of the business. In Islam the workers of the banks will also have the share in the profits of the banks. As workers of the bank, they will earn about 2/3 of the profits earn by the banks. Beside the main shareholders, all those who deposited their money as fixed deposit to the banks are also the shareholders of the bank. All the shareholders of Islamic banks, including those who had deposited their money as fixed deposit to the bank will have a share of about 1/6 of the profit earn by the bank and the other 1/6 of the profit is given to the government. All the shareholders, depending on the amount of money they contributed as capital to the banks will get the 1/6 share of the profit obtain by the bank. Since the workers of the bank will obtain about 2/3 of the profit, the workers of the bank will certainly work hard and smart, in order for the banks to have more profit. When the workers work hard and smart, businesses of the banks will certainly increase. As businesses increases, the profit gains by the bank also increases. With more profit both the shareholders and the workers of the bank are happy and at peace with each other.
Nowadays a person who has no money but having expertise will not be able to start a business unless he or she takes loans with interest from the banks. Many such persons with expertise will decide finally not to do business, because it is difficult to obtain loans from the banks, without collateral. All banks including the current Islamic banks want collateral from a client who wants to borrow money from the bank. When they do not have collateral, they cannot obtain loans from the banks and they cannot start the business. Many of those with expertise finally decided not to do business but to become only workers. Among those who have collateral, some have the fear to start a business because they fear they might lose the collateral in case their business fails. Many peoples have expertise in many fields but do not have the expertise in financial management. Many, who borrow money from the bank, end up with failure, because of poor financial management. Many, who borrowed money from the banks, end up a bankrupt and because of that they are unable to have anymore loans from any banks.
Both, conventional and current Islamic banking systems are not business friendly. With our current banking system, banks are only responsible to gives loans with interest to the clients and other that they are not interested. Banks are only interested in the money making and not in developing the business of their clients. What does our current banking system really want? Our current banking system only wants the clients to pay back the amount of money borrowed from them, together with the interest. What our banks really want is the money. Our banks are not interested with the business of their clients. Nowadays even with the high interest rate and collateral, many who wanted to do business are forced to borrow money from the banks. In order to do business many are forced to use their own houses or their parent’s land as collateral. Many who have failed in their business have to let go their own houses and their parent’s land to the bank. Many are without houses and they loose almost everything they have, because they are forced to use their own houses and lands as collateral when they borrow money from the banks. Many are scared to have loans from either the conventional or the so call Islamic banks and many are forced to go to the along or private money lender for loans. Many of those who use the services of along or private money lender end up with problems and months of nightmare. How to solve these problems? These problems will only be solved when Malaysia have a banking systems which adhere strictly to the principles of Islam.
True Islamic banking system should be customer friendly. The Islamic values adopted by Islamic banks are helping the creations of Allah. The slogan of an Islamic bank should be “helping others who are in needs, with the intention to please Allah”. Allah forbids Muslims who are in the position to help taking advantage of those who are in needs of our help. Those who are in needs of our help, Allah order us to help them and our intention of helping them is only to please Allah. When we charge interest on the money that we loan to others, who are in needs of our help, we are not helping, but we are actually exploiting them. By charging interest on the loans we give to those who are in needs, we are actually increasing their financial burden. Allah strongly forbids the Muslims from involving in all activities which associate with interest or riba. Interest or riba is haram and anything associated with the practices of interest or riba is also haram.When we buy our foods with the money which is haram, our foods also become haram. When we eat foods which are haram, our prayers or doas are not accepted by Allah. Islamic banking system is customers friendly. Both Muslims and non-Muslims will like to use Islamic banking system in all their business and daily activities. Islamic banking system will helps the country to create new business opportunities and to create many new business entrepreauners. Islamic banking system will also help those who have no money but having expertise in various fields to start new businesses by accepting them as partner with the Islamic banks. Islamic banks will guide them in financial management and to finally guide them to have businesses of their own. With Islamic banking systems, everyone can own cars, houses and all their needs with minimum costs.
Prof. Dr. Nasoha Saabin
Dean of Faculty of Optometry
Twintech International University College of Technology
Kuala Lumpur, Malaysia