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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....

Note: Opinions expressed in comments are those of the authors alone and not necessarily those of Daniel Pipes. Original writing only, please. Comments are screened and in some cases edited before posting. Reasoned disagreement is welcome but not comments that are scurrilous, off-topic, commercial, disparaging religions, or otherwise inappropriate. For complete regulations, see the "Guidelines for Reader Comments".

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Note: Opinions expressed in comments are those of the authors alone and not necessarily those of Daniel Pipes. Original writing only, please. Comments are screened and in some cases edited before posting. Reasoned disagreement is welcome but not comments that are scurrilous, off-topic, commercial, disparaging religions, or otherwise inappropriate. For complete regulations, see the "Guidelines for Reader Comments".

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