Terri Alpha, I was wondering if you can recommend me books and research material, that I can use to have a stronger grasp of Islamic Finance
Islamic Finance and Economics
- Thread starter ABG
- Start date
Jazakumullahu khairan brother, I appreciate your assistance
Never understood the difference between conventional and Islamic loans.
@Teeri-Alpha you might be able to clear some stuff up for me.
Get back to me whenever. Not in a rush to get a murabaha mortgage anytime soon.
In murabaha financing the lender pays for the item the borrower wants and resells it to them at a higher price.
The borrower then pays the lender on an agreed set of monthly or annual installments.
What makes this different from a conventional fixed rate loan other than the wording?
Also with Islamic financing you can't request a refinance and early repayments are not permitted.
There's no competitive market for the fees (i.e. called interest rate by normal banks) and you might end up paying a lot more.
Also since there's no variable interest rate how does the lender deal with inflation? Especially in long duration loans like mortgages?
Do they package up your loans and sell them on to investors like conventional lenders?
Do they own the titles to property while you repay them? If they go down do you lose your property?
@Teeri-Alpha you might be able to clear some stuff up for me.
Get back to me whenever. Not in a rush to get a murabaha mortgage anytime soon.
In murabaha financing the lender pays for the item the borrower wants and resells it to them at a higher price.
The borrower then pays the lender on an agreed set of monthly or annual installments.
What makes this different from a conventional fixed rate loan other than the wording?
Also with Islamic financing you can't request a refinance and early repayments are not permitted.
There's no competitive market for the fees (i.e. called interest rate by normal banks) and you might end up paying a lot more.
Also since there's no variable interest rate how does the lender deal with inflation? Especially in long duration loans like mortgages?
Do they package up your loans and sell them on to investors like conventional lenders?
Do they own the titles to property while you repay them? If they go down do you lose your property?
Ugaas i am so sorry bro, wallahi forgot bro, pardon,
this is the best book i can recommend
The Problem With Interest Paperback – 18 Oct 2010
by Tarek El Diwany (Author)
i met him, he is the only one i can recommend, lots of books out there but to be fair most do not deal with deep islamic issues, they just seem to attack western systems with out giving real solutions,
he is a former trader, and consultant,
he also runs
http://islamic-finance.com/indexnew.htm
his dad is Egyptian and his mum cadaan, he was a former derivative trader, raised and born in UK,
anything else let me know,
waad mahadsantahay sheikho
in order to use mudarba or murabaha, they must own it, the letter of the law says they must own it in full possession before they can resell it, they must take the risk, own it then re sell at an agreed price,
some exploit this in my opinion, i could be wrong, they buy it then turn around and re sell to you, but only buy it when they know some one is looking for it, its a grey area for me, for me the issue is banks like Islamic bank of Britain renamed alrayaan bank where they buy it and charge you what is really interest where repayments fluctuate monthly in a non fixed repayment,
but any repayment must be fixed, no increases allowed, if it changes from one month to the next its riba, no iffs,
if they buy then re sell to you and keep the monthly repayments fixed, it must be the same through out the entire contract length,
there will be competition in Islamic market, one bank can charge you less re sell price then the next etc, one can offer 30 year repayment compared to another with 25 years etc, innovation can exist in a free market,
in terms of inflation, let me say this, inflation exist because of riba, if there is no riba and the money used is gold/silver as God ordered us muslims, then there will be no inflation, in fact over time your money will have more value as the money supply increases less than the available goods, gold is fixed, no human history of over 5000 years has gold supply increased more than 15 for one year, so as long as the economy grows more than that there is no inflation, the classic definition of inflation is the increase in money supply, fiat money, in fact you must print money in order to keep paying the interest on the money supply as today fiat money is debt, money is only created as debt, so its a vicious cycle, you can never pay all the interest on the debt with out printing money, hence inflation is the grandson of riba, the seed is riba,
no point of repacking these loans like they did with sub prime loans as the new investor will not enjoy from increasing monthly repayment,
the title deed will belong to asli investor/financing firm or person till fully paid, if an equity increase and the buyer cannot pay the rent anymore then he or she will get the share if the loan is complete, example if he has paid 505 off then he will get a share of any extra profits/equity if the house is sold for a pofit due to an increase in equity,
hope that helps, ask or feel free to ask if you need more answers,
i have devised a system where a lender can lend a loan and still benefit financially with out riba, it will change many paradigms, but we need gold and silver based economy for it to work,
Thanks for getting back to me.
So instead of a variable rate they hedge their risk with appreciation gains?
Question here is whether you as a buyer would only be able to profit from the appreciation of the equity you already own.
Also would you start paying of the principal from the first payment?
Conventional loans first get you to first pay of the interests first before you start paying of the principal.
So let's say you paid of 50% of a 500k loan and the house price goes up by 20% then does that mean your value of the share you already paid for increases by 20% (250k+50k ≈ 20%)?
Or am I reading this wrong and the bank owns 100% of the equity of the property and they gain 100% of the appreciation gains until you pay it off fully?
That might work for owner-occupiers if the fee is reasonable but not for investors who leverage equity to go out to buy more assets.
oh by the way i forgot, as far as i know there is no refinance allowed as you cannot mix a loan with a sale, since the property is already owned by another entity, who will own it if you borrow or refinance from another entity? and since you cannot mix a loan with a sale this is not allowed, its to avoid riba or what we call qaraar, confusion,
for a business maybe you can get another loan since it can be paid off through profit, but who will own the refinance of the property in case its refinance by a different company? it creates a clash,
for a business maybe you can get another loan since it can be paid off through profit, but who will own the refinance of the property in case its refinance by a different company? it creates a clash,
Seems like there's a lot of space for development in these financial products.
I guess they work for the essential service of making properties affordable to the masses but the bigger opportunity here is catering to investors.
I want to be able to put my money into halal rental property investments but I'll be priced out of most deals since the rental income alone isn't enough to make it worthwhile.
Also I can't grow my portfolio as fast if I can't leverage or refinance.
