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Debate on Islamic Finance by Riazat Butt

Guardian Unlimited looks at Islamic Finance with Junaid Bhatti from the Islamic Bank of Britain, Ed Balls Economic Secretary to HM Treasury, Tony Levene from the Guardian, and Sharia-sceptic Dr Mohammed Saleem.

> Click here to download the debate now.

Guardian Unlimited © Guardian News and Media Limited 2007

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"Not surprising that HSBC have taken this action as they have a large presence in the Middle East. An important point for all Muslims to remember is that even though Islamic Mortgages may be more expensive than conventional interest based mortgages, because they are Halal they must be your first choice. What we require now are more solicitors to understand the legalities and processes involved in purchasing a property using an Islamic mortgage".  Abid Ghani, UK


"Finally, UK banking wakes up to the needs of the Muslim community. I've been looking to buy a house with the National Bank of Kuwait. Now I can use my own bank, HSBC".  Muhammed Sheikh


"I can't believe that people are falling for this. You can call it anything you want - at the end of the day, what the consumer is paying is interest to the banks, except it's dressed up as 'rent'. At the end of the day, one could take the same view of the current system and think of the monthly mortgage payments as rent".  Shamaz Majid, England


"A long-awaited product range that the Western Banks could have offered years ago. Nevertheless it's a good move. I'll be quick to switch my mortgage over".  Azad, England


"I (along with many) have always wanted easy access to Islamic financial services in the UK. Until now only a few of the "smaller" banks have offered anything that remotely match the requirements of Islamic Law - unfortunately, many of these services involve the consumer having to pay out much more in the long term when compared against a conventional mortgage. Personally, I'm glad that HSBC have been the first of the "big banks" to offer this service, as I have been a life-long customer and have never had problems with them".  Mueed, UK


"Unless the mortgages are completely untied to underlying interest rates, the suspicion remains that 'rent' is just another term for interest. Other considerations would include questions on where the bank is getting money to buy these properties - if it's in the normal way, then that money is already tainted, and crucially, what happens when a 'tenant' is struggling to make the 'rent' - in any Islamic business, the service-provider has to share any risk with the purchaser".  Taz Uddin, England


"Islamic mortgages are by no means a perfect solution to Muslims, but at least they are a step in the right direction at avoiding in dealing with interest based products. I have currently got a Manzil loan (Ijara scheme - repayment based on leasing) with the United Bank of Kuwait (UBK). The administrative costs were very high and the application process was slow and complicated. My repayments are high too, compared with conventional high street products, but this is mostly to do with economies of scale. I can understand why many Muslims are put off by the UBK home financing schemes. More competition and products in the area of Islamic financing is most certainly welcome".  Abdul Mumin Choudhury, Bristol, UK

"It is a good idea that such products are becoming available, irrespective of whether it has been launched by a Western Bank. If the products themselves stand up on their own (and comply with Shari'ah)and provide a real alternative to the conventional mortgage even if it is a little bit expensive, we should seriously consider this form of financing. It is only a matter of time until this form of financing directly competes with the conventional mortgages and provides a choice for Muslims and Non-Muslims alike. After all the concept of fairness and equity is universal".  Nurul Alam, London, UK


"I for one am very glad, I have a mortgage with UBK and I know several of my friends want an Islamic mortgage but cannot afford the deposit which is substantial. As for those who say its interest dressed up as rent then all I can say is at least we are trying to follow a more Islamic path and these schemes have been approved by our scholars hence we have no guilt :)".  Kasrul Islam, UK


"The source of money is irrelevant, it does not really concern us very much as long as it is buying the property from our own Halal earned money and the contract of purchase is accepted by a panel of Shariah scholars, if we were to ask about the source of funds, then buying anything will be a complicated subject, where does Tesco get their money to buy their supplies or where does the corner shop get their funds to fill their shelf; Allah knows best".  Hassam, London, UK


"All I can say is that when I plugged in the figures on the various websites that can work out monthly mortgage rates e.g. Alliance & Leicester, etc, it didn't compare too badly [if you don't compare with the discount deals, that is].  Anonymous


"Mufti Taqi Usmani - or at least that is my perception..... as far as I know he is the world's leading authority on Shariah related financial issues - this is what I hear from Hanafis and shuyukh of other Madhabs. Of course not everyone will agree with his opinion - doesn't bother me."  Anonymous


"Sheikh haytham al-Haddad has given a fatwa against the ijara mortgage which is offered by banks such as HSBC and others. he says there is no significant difference between the normal mortgagee and the ijara. Anonymous


"The fatwa I think [against the current Islamic mortgages on offer] is pretty unreliable in terms of being a sound qualified Sunni source.  I'd have a read of Mufti Taqi's book - it's good, and I would certainly use it as my guide.  Anonymous


"... the banks are exploiting Muslims to make a profit for themselves.   But I still think the contracts for Islamic mortgages are Halal and definitively worth looking into as an alternative to conventional mortgages...  Anonymous


"Currently these Islamic financing schemes look like they exploit....but hey, that is long as they are halal...that is the main thing.  There is a really good system called a 'conventional mortgage' from my local high street bank....the rates are excellent....but unfortunately its haram.  It's a question of halal and haram for now...not which system 'exploits' more.  Anonymous


"What happens if I die before I pay off the islamic mortgage. Islam doesn't allow life insurence, so what should one do? Its all good and well one is saving one self from not paying interest on mortgages, if it does not mean anything at the end".  Dilu Miah - Kent


"Shariah requires an equitable share of the risks involved to be taken by both the financier and borrower as per the famous narration al-kharaj bi al-daman -all these mortgages break this principle by offloading all the risk onto the borrower. Hence all the prohibitive terms are usually hidden in the fine print and not highlighted.  Famous scholars can give incorrect fatwas as they are only human as history bears witness. And being paid to sit on committees makes them biased.  We will be accounted on what we follow and we should take responsibility for our choices and account those jurists who are playing games with Allah\'s deen...".  Anonymous


"I am all for Islamic Mortgages and I think it is a good idea, in order to help our Ummah, but there are three things that I am sceptical about. Firstly, if it is supposed to be a partnership with the bank (through profit and risk sharing), why is the house owned by the bank? To my knowledge of UK Law, you can have multiple owners of the house, so the house should be jointly owned? Secondly, why does the rent have to be benchmarked to an interest bearing mortgage. An Islamic Mortgage is just that, so why is it acceptable to have benchmarking. To my knowledge, estate agents have to prices on a house; the price to buy, and the monthly rental price. Since the rent is purely the bank's profit, why does the bank not use this figure provided by estate agents for charging rent. Thirdly, linked to the benchmarking. The rent is volatile to interest rate fluctuations. We are no better of that our Non-Muslim counterparts are we? The Theory is that as we own more of the   house and the bank owns less, we are supposed to pay less rent. Is it not about time that somebody addressed these fundamental flaws of the Islamic Mortgage?".  Faisal Memon


'Who are they trying to fool, us Muslims or our LORD MIGHTY, paying interest is haraam. Reason being is due to paying interest, the rich get richer and poor get poorer.  It's disliked by   ALLAH.'  Idrees frooq


'Forgive me for being so blunt.  This is just substituting the name interest for the name rent, it is not right.  What would be the most logical way to do an Islamic Mortgage would be  - to buy the property which the customer is interested in, then sell it to them for a reasonable profit margin, let's say 20%.  But allowing the customer to pay back over a period of time, as they cannot afford to pay the banks a lump sum.  Anything else is an extortionate amount of profit, which is to my knowledge interest.'  Mohammed Rashid.


'Main issue is it's difficult to find the halal nature of these mortgages is 'forced' and hence just an invalid workaround, or what the exact Islamic legal reasons are - i.e. the historical (or other) basis for these form of transactions?'  H Shafiq


'Isn't it better to have a normal mortgage from a bank because at least they give you the option to pay back all of the lump sum of money after the 2 year period whereby Islamic mortgages you have to wait for 20+ years or more to have the property on your name so my dear Islamic brothers I would recommend to all my friends and colleagues not to go for Islamic mortgages because they are worse and they rob you. '  R Mohammad, UK



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Islamic Finance podcast

Mohammed Amin of Price Waterhouse Coopers, has recorded a pod cast on Islamic Finance; Mohamed gave a talk in London last year regarding its taxation (August 2006). To share this with readers, he has recorded the presentation in audio format.

> Click here to download this audio broadcast.


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