Banking and Exchange
From the viewpoint of capital the banks in Islamic countries can be of three kinds:
(i) National bank, whose capital is owned by one or more persons
. (ii) Government bank. which is purely financed by the State.
(iii) Company bank. which is financed by the government and public.
2856. It is not permissible to take loan from such a bank on payment of interest, ar,d it is also unlawful to accept profit from it. However, in order to avoid such an unlawful transaction the borrower will either:
(i) Purchase something from the owner of the bank, or his agent, at a rate say 10% or 20% higher than the market rate, so that the bank may give him some money by way of loan
(ii) or he may sell something to the bank at a price lower than the market rate subject to the condition that the bank will advance him a certain amount of money by way of loan, repayable by a stipulated date. In that event it is permissible to obtain the loan and it does not also amount to usury. Similarly a gift may be given subject to the condition that one who fives the gift will be advanced a certain amount of money by way of loan, repayable on a particular date. However, a transaction does not cease to be unlawful if something is added to a certain amount of money and it is then sold for a larger amount of money. For example it is not lawful to sell a sum of $ 100 together with a match box with the condition that a sum of $ 100 will be payable in lieu thereof after the expiry of one month, because in fact it is an interest bearing loan although apparently it has been given the name of business transaction.
2857. It is unlawful to deposit money in a bank (in the savings bank account or current account) with a view to earn interest. However. there is no harm in depositing the money if there is no stipulation for the payment of interest.
2858. If some property is taken from a government bank it is not lawful to utilize it without the permission of the mujtahid (Jurist) or his representative.
2859. It is also unlawful to obtain loan from a government bank on payment of interest whether or not it is obtained by mortgaging some property. However, there is no harm in obtaining loan from such a bank with the permission of the jurist or his representative, although the person obtaining the loan may be aware that, whether he likes it or not, the bank will charge some additional amount from him, and even though he will have to pay the additional amount when the bank demands it, he can take the loan from the bank.
2860. It is not lawful to deposit money in a government bank to earn interest. However, there is no harm in making such a deposit without making a stipulation for payment of interest i.e. if one intends not to demand interest in case the bank does not pay him the same. However, ii the bank gives him profit he can accept it with the permission of the mujtahid or his representative as derelict property* (Malul Majhul) This also clarifies the position of a bank whose capital is jointly owned by the government and the public i.e. its property is to be treated as derelict and the same orders apply to such a bank as they apply to a government bank. These are the orders relating to the Islamic banks. As regards the banks belonging to the non Muslims, however, property may be obtained from them without the intention of taking loan and without obtaining permission for doing so from the mujtahid. Nevertheless, as regards depositing money in such banks, the same rules apply to them as they apply to the Islamic banks. * Property where owner is nor known.
LETTER OF CREDIT FOR EXPORT
2861. It is lawful for one to obtain an L/C from a bank for import and export business and it is also apparently lawful for a bank to provide foreign exchange on payment of commission and to charge commission, because from the point of view of jurisprudence such a commission will either be called 'wage'* or 'agreement'** and it is also possible to treat it as sale and purchase. As the bank pays the price of the goods by means of foreign currency it is possible that the bank may sell the foreign currency payable by an importer at such a price that it may also earn its own commission from it and as the transaction takes place with regard to two different things it is in order. In this regard another alternative can be that tile persons engaged in import and export business may obtain information through the bank and then the bank may continue to provide the goods and pay its price on the basis of L/C. In such circumstances it will also be lawful. *because a businessman hires a bank for a particular task. In case, however, the bank is not a domestic one the hiring will be valid only with the permission of the mujtahid or his representative(wakil). ** To promise payment of some amount on one's performing a particular task.
2862. If the bank pays the price of the imported goods on behalf of the L/C holder and does not treat it as loan advanced to him and obtains some profit from the importer on the condition that it will not demand from him the price of the goods till a stipulated date, such a transaction will apparently be in order, because the importer becomes liable for it on account of his having asked the bank to pay the price of the goods. In case, however, he has obtained loan from the bank and the bank charges interest on it and, in such circumstances, the bank advances a loan to the L/C holder and stipulates payment of profit by him and performs the task of import on his behalf. it is not lawful for it to charge profit. These rules also apply to the businessmen who perform this task.
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