Is it true that muslim banks do not charge interest for loans or etc.?

Question

I seen this topic in another question earlier. If they do not charge interest then how do they make their money? Also, what is to stop someone from getting an interest free muslim bank loan and depositing the funds into a interest earning savings or checking account?

Answer 1

An Islamic bank (as a Muslim bank is called) does not charge interest. This is because interest is banned in Islam.

Instead Islamic banks have something called a profit rate. Its an extra charge that you as the customer pay for having an interest-free loan. this is how islamic banks make a profit, hence it's name. Quite clever huh?
Here's how it may work:
say you want to buy a car for X amount. Normally you'd approach a bank a get a loan. For an islamic bank you apply for them to buy the car for you and then you buy it from the bank for X+Y amount, Y being the profit the bank makes.

There is alot of debate in the Muslim world as to how legal profit rates are.
As for the last part of the ?, absolutely nothing but their own conscience.

Answer 2

under islam interest is strictly forbidden.
islamic banks that give no interest loans are kalled amana takaful banks and they simply charge a profit.
thing is this charge is probably not very big, coz a bank is the only institution that can 'create' money. if all the bank's customers have in total deposited 1 million dollars, the bank has to put like 10% in the state bank and then can give more than the remainder as loans, (say 1m -10%=900k, 900k x1.5 =1.35 m loans) and then they get a masive return when u pay back a loan on money that the bank doesn't actually have. all banks work this way, so profit isn't really that big an issue.
as for stopping a person putting it in a bank with interest; nothing but in a muslim their beliefs if they are strong enough.

Answer 3

I have learned that Muslims do not charge interest on their loans. It is sort of considered as robbing somebody. That being said I don't know how they make money. But there are tons of websites and articles about it. Just type in Muslim banking. There is no way to stop somebody from putting there money in an interest account, that would have to be between that person and their lord.

Answer 4

"Heron" gets it pretty right. Charging fellow-Muslims interest is forbidden under the Qu'ran, but I think you can charge others.
When it comes to Muslims, you charge a set fee, rather than 'interest' to lend them money - while paying them a set fee for using their money.
It's easy enough, my country (which is Western), for instance has a Credit Contracts Act. Under it any time you make hire purchase, mortgage or loan/overdraft, you get full details of what it's going to cost you. Change "Interest Rate" to "Set Fee" and it would workfor Muslims.
Think it was the Guardian paper in UK had recent article online re new Muslim Bank in UK and how it dealt with situation.
guardian.com or guardianonline.com

Answer 5

Wow, I didn't know that was true, but I assume that Poki Poki knows. And I'm not really surprised, because the Qur'an does criticize loaning at interest. Perhaps they charge a set fee or something. But if the fee is comparable to what would be made on interest, this seems to be just a loophole. I'd like to know more about it.

Answer 6

Correct .. the way such a Mortgage works is as follows :- The Bank buys the house for eg. £100,000 The Bank sells you the house for eg. £200,000 You pay this off over 10 years at £20,000 a year The Bank has made (simple) gain of 100%/10 = 10% a year The Bank has not 'made money on money' .. they have made money by selling you a house This is, of course, simple a pointless exercise in money shuffling in order to appease Allah .. plainly they must think Allah is really stupid, since they expect Allah to be fooled by it )

Answer 7

yes its true, interest on loan is prohibited in Islam.

The Evil of Ribaa(interest)
Allaah, Most Glorified, Most High says: { Those who devour ribaa do not stand except like one who has been driven to madness by the [evil] touch of Satan. That is because they say: “Surely, trade is like ribaa. But Allaah has made lawful trade and forbidden ribaa. So whoever receives an admonition from his Lord and stops devouring ribaa, shall not be punished for the past. His case is for Allaah [to judge], but whoever returns [to ribaa] such are the dwellers of the Fire - they will abide therein } (Soorah 2:275)


Al-Bukhaari reports that the Prophet e cursed the one who took or received ribaa.
It is also reported by Al-Bukhaari, that Bilaal t came to the Prophet e with some barni (a type of dates), who asked him: “From where did you bring these?” Bilaal t replied: “I had some inferior kind of dates and exchanged two sa’ah of them for one sa’ah of barni dates, in order to give them to the Prophet e to eat.” Thereupon, the Prophet e said: “Beware! Beware! This is precisely ribaa! This is precisely ribaa! Don’t do so, but if you want to buy (a superior kind of dates) sell the inferior kind of dates for money and then buy the superior kind of dates with that money.”
And it is reported that ‘Umar e said: “Abstain from ribaa and rabeebah (transactions resembling ribaa, in which there is some doubt).”

Answer 8

Yes islamic banks won't charge any interest on loans.
Taking interest is haram in islam

Answer 9

But I know some mortgage broker who are Muslims really cut throat profit/interest.

Answer 10

typically with religious free loan societies the loans are not that big (a few thousand) and they require a co signer that can prove they can pay if you default.

So if you can get that you can try your plan.