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Doha
- Dr. Osama Qais Al-Duraie, CEO of Bait Al-Mashura Financial Consultations - based in Qatar - likens Islamic banks in the world to a “trader” in a huge financial market among other giant traders (traditional banks), and this trader deals according to his own controls and the controls of others at the same time. But without giving up any of the principles of its Islamic financial law.
Al-Duraie confirms, in an interview with Al-Jazeera Net, that the Islamic finance system was able to preserve its structure and entity from collapsing and stumbling during global financial crises because it is protected by the strength of “Sharia controls,” which is the force that protected the Islamic financial system from collapse during the crisis of “selling mortgages” or debts. In 2008, the Islamic finance system does not fall into the realm of “selling debt” because it is forbidden.
The CEO of Bait Al-Mashura explains the difference between credit cards in Islamic banks and traditional banks. In traditional banks, they depend on “usury,” while in Islamic banks they are far from “usury,” but rely on profitable contracts in accordance with Islamic law, considering “financial technology” It is the most difficult test for Islamic banks during the coming period.
The following is the text of the interview:
What distinguishes the Islamic concept of money and its preservation from other statutory legislation?
Islam paid great attention to money and gave it real value in human life. Therefore, when God Almighty mentioned money, he mentioned it as something important and close to man, as God Almighty says: “Adorned to mankind is the love of lusts for women and children, and arched centaurs of gold and silver, and branded horses, and cattle, and crops. “Enjoyments of the worldly life, and with God is the best return.”
God Almighty mentioned all types of money in this noble verse to indicate the importance of money in a person’s life, but he did not prioritize it over worship, but rather made it a tool to help in obeying God, and whoever prioritizes money over obedience to God Almighty has upset the balance, and for this reason zakat, charity, and expiations were established. All of it comes from money and acts of worship.
Islam did not give money priority in human life, as did other legislation and systems that made money the basis, and what is less than money is not worth anything, because for them money is the goal and other means complement or connect to this goal, while money in Islamic law is not the goal. itself, and therefore we find that Islamic jurisprudence has been divided into two parts:
Worship: The principle in them, as scholars say, is “stopping,” that is, the “origin” in worship is to take them as they are.
Transactions: They are lawful and permissible according to Sharia rules.
Therefore, what is forbidden is what the noble Sharia has commanded us to stop doing, and what remains of that is permissible if it does not conflict with the principles and Sharia rules of money.
The Islamic finance system was able to preserve its structure and entity from collapsing and stumbling during global financial crises.
How do you respond to those who accuse Islam of having a restrictive view of money compared to liberal and secular ideas that give traders absolute freedom to dispose of money?
The Holy Sharia has set certain “standards” for dealing with money. There is nothing in life without controls that organize and control it, otherwise the issue becomes “failed and ineffective.” An example of this is when you are driving by car on the road, you find traffic lights in front of you, a speed bump, and instructions. Roads, and these are important standards for safe driving, and therefore: Money cannot be a loose issue that humans deal with in an undisciplined manner.
The Sharia has set specific controls for dealing with money, and commanded us to pay attention to them in our financial dealings. As for the remaining issues, we take whatever we want and deal as we want according to the controls. This is the Sharia standard that set specific standards for financial transactions, and told the Muslim to measure all your financial transactions against them. If it agrees with these standards, do whatever you want, and if it differs, it must be measured by other standards and controls, which will produce a different system for us through what is called financial engineering.
Financial engineering is what gives insight into certain transactions, resulting in a new financial product that may not have existed in the era of the Prophet Muhammad, may God bless him and grant him peace, for example “credit cards”, which is an aspect of technology, which did not exist in the era of the Prophet and the Companions. How were these credit cards adapted? It was adapted through the standards and controls set by jurists. Today, we do not carry money, nor do we deal with money, but rather we deal with what is called “digital money”, in which disciplined legal standards have been implemented, and a practical application has been applied that facilitates people’s lives.
What is the difference between credit cards in Islamic banks and traditional banks?
The credit card in traditional banks depends on “usury,” meaning that the money you take from this card is a loan and must bear interest, and interest is forbidden. However, in Islamic banks, it is far from “usury,” and transactions are done through them through Murabaha contracts, leasing, and qard al-hasan. We deal with all of these legitimate contracts that are applied in Islamic banks every day, but without realizing it.
According to studies we conducted, we found that each of us deals between 3 and 5 legal contracts every day, but he does not understand these contracts or how to implement them. An example of this is “purchasing groceries.” If we ask ourselves, what type of contract is there between us and the grocery store owner? As well as the petrol station, the tailor, and others.. These simple contracts are the same as the complex complex contracts in Islamic banks, and they do not differ at all, the only difference is the procedure. If we understand the contracts that we evaluate daily, it will be easier for us to understand the transactions of Islamic banks and their system.
How do you evaluate the size of the Islamic economy compared to global financial systems? Is the concept of money really freer in Islam?
The world looks at the modern financial system through financial institutions, and these traditional or usurious institutions are more than 400 years old, as they spread in the world before the Islamic financial system, which was formed in the form of banks, and their age does not exceed 50 years, so the comparison here between 50 and 400 years is invalid. Fair for the time difference, but when you look at the Islamic financial system in general and the speed of its spread, you find that it is more widespread than modern financial systems.
In light of this, the Islamic financial system has spread faster than its traditional counterpart, although the time difference is very large, as the size of the assets of Islamic institutions in the world has reached about 2.5 trillion dollars, while the size of the assets of Islamic banks has reached 1.8 trillion dollars, and this gives us the impression that the Islamic financial system is expanding. Extremely quickly.
Today, we see many non-Islamic countries amending their laws to accept the transactions of the Islamic financial system. Korea, China, Singapore, East Asia, America, Britain, and most of Europe have reformulated their constitutions to allow Islamic financial transactions to operate in their countries, and here the Islamic economy has succeeded in expanding due to its distinctive adaptability. According to his incubating environment.
The Islamic financial system has become more widespread than its traditional counterpart, although the time difference between them is very large.
How does the Islamic finance system face economic challenges and the horrors of an economic world full of debts and defaults?
The Islamic finance system was able to preserve its structure and entity from falling into huge abysses of financial failure in many of the crises it faced. For example, the financial crisis of 2007-2008 and the accompanying mortgage crisis, the direct cause of which was the “selling of debts” prohibited in Islamic law.
The Islamic financial system did not enter into these absolutely forbidden usurious transactions due to the strong “Sharia controls”, and therefore it was not affected by the global financial crisis and preserved its entities and assets, while major countries entered the world of selling debts such as Greece, Spain and Italy, where these countries and others reached the point of resounding collapse.
During the year 2008, after the debt crisis, the US Congress asked the large financial institutions a question: Why were Islamic financial institutions not affected by the debt crisis? They responded with a report confirming that Islamic financial institutions have specific standards and controls. They do not deal in usury and do not deal in selling what they do not own. These standards are the basis of Islamic financial transactions.
However, Islamic finance adapts according to the conditions of the country or geographical region in which it is located. Sometimes we find financial fatwas that suit a certain group of society and not others. An example of this is the issue of selling non-existent goods, which is prohibited in Islamic law, as it is not I can sell you something that does not exist.
However, due to the flexibility of Islamic legislation, some types of non-existent sales were excluded “for the need for exception”, including “the sale of a commodity that does not exist”, where “the immediate sale is made for the deferred one”, and the money is paid in advance so that the goods can arrive later. The noble Sharia looks primarily at the needs of the people, and this is what It is called flexibility in Islamic financial transactions, which has given the Islamic economy great comfort in dealing with all different social environments, in contrast to the fact that the Islamic economic system is seen as complex.
What is the secret of the success of Islamic banks in integrating and dealing with the system of markets and traditional global banks while preserving Sharia controls and principles?
The secret is that Islamic banks deal as a “trader” in a huge financial market among other large merchants (traditional banks), and this merchant deals according to his own controls and the controls of others at the same time, but without giving up any of the principles of his Islamic financial law, and this is what drives Other traditional banks must take into account Islamic Sharia regulations.
One of the beauty of the Islamic bank is that it imposes its strong and influential personality on other traditional institutions, including central banks and state governments. For example, former British Prime Minister David Cameron launched Islamic sovereign sukuks worth 100 million pounds sterling, in addition to bonds, and this means that the matter has become a perspective for governments. Western countries are not obligated to implement or adopt an Islamic financial system, but because they found that this system is useful and allows the development of their financial system, they adopted it in a sovereign manner.
Islamic financial institutions have specific standards and controls. They do not deal in usury or sell what they do not own. These standards are the basis of Islamic financial transactions.
What are your expectations for the size of Islamic assets during the next 10 years? Do you think it is capable of keeping pace with the accelerating financial technology in the world, which has become a reality that imposes itself on financial products?
I expect that the size of the Islamic system’s assets will reach double what it is at the present time, that is, to reach 5 trillion dollars.. But we must take into account that the Islamic financial system is “the daughter and incubator of its environment,” and therefore any positive or negative impact on the system will be affected. Such as inflation, lack of financial liquidity, wars, and other effects. The Islamic finance system is not immune to the environmental environment that embraces it, but as an institutional entity, we expect great growth and a successful future for it.
As for the Islamic system keeping up with financial technology, I see that it has become a reality that imposes itself on all Islamic and traditional banks, and the real challenge for the Islamic system is developing financial products (contracts) through financial technology. On the other hand, it will be easy for traditional banks based on the loan and its benefits, but the Islamic financial system has contracts governed by Sharia controls, and every product has standards and rules for both parties: the seller and the buyer, the manufacturer and the manufacturer, and the lessor and the lessee, and the challenge will be in these issues in the coming years.
The new touchstone for Islamic finance now and in the future lies in how to benefit from technology and its various uses of “smart contracts” and “artificial intelligence.” If Islamic financial institutions adopt them in the correct form, they will outperform other institutions.
The Holy Sharia looks primarily at the needs of the people, and this is called flexibility in Islamic financial transactions, which has given the Islamic economy great comfort in dealing with all different social environments, unlike those who view the Islamic economic system as complex.
What is the position of Sharia and Islamic banks in general on digital currencies? Can Islamic banks launch digital currencies in the future, or are they forbidden by Islamic law?
We cannot call digital currencies in general forbidden. In this way, we may refrain widely. The alternative is that many countries in the world allow them and deal with them. But the crisis in the issue of digital currency is that it has no guarantor, and it does not have an issuing body that we can take to court, and this is the main fear. For all Arab and Islamic central banks, what is the source of these currencies in the event of their loss? What is its financial cover? Who guarantees these currencies? All of these questions have not been answered by digital currencies yet, and if they are answered, digital currencies will become permissible for all Islamic banks.
I see that if there is an accredited institution or entity that guarantees digital currencies, then there is no harm in dealing with them. Currencies, whether regular or encrypted, are not a problem in legislation, and are not essentially inviolable. Rather, inviolability lies in the cover and the guarantor, meaning that the state issues the currency under the cover of gold. This is what cryptocurrencies lack.
Currencies, whether regular or encrypted, are not a problem with legislation and are not essentially inviolable. Rather, inviolability lies in the cover and the guarantor.
There is often confusion about the difference between Islamic and conventional banks in granting loans and financing, and some believe that all banks earn interest, regardless of their methodology. Can you explain to us the difference between the two?
The difference between them is in the "murabaha mechanism", and when we understand this mechanism we can understand how the profit is produced. The issue of percentage is not the decision on whether the transaction is permissible or not, but rather the mechanism of dealing with the customer and the standard for what is permissible and what is forbidden is the detail, meaning that the matter of profit is the purchase of a commodity from The bank accepted and sold this commodity at a cost in excess of the original cost, and this is a permissible profit. An example of this is that the Islamic bank buys a car for itself for 100,000 and sells it to the customer for 110,000. Here the bank made a profit of 10,000, but the traditional bank does not buy or sell, but rather lends money..
Here is the difference between Islamic and traditional banks. The work of Islamic banks is buying and selling, while the work of traditional banks is usurious lending only, and they are not entitled to buy and sell, and here is what is forbidden in the matter, and it is the aspect that many customers may be ignorant of because the process was not explained by the employees in the banks. Islamic.
I blame the employees in Islamic banks because many of them neglect to explain this mechanism to the customer, leaving him confused: Is this mechanism correct and legitimate or not? This is what we have often warned against, as the employee in Islamic banks is a messenger and not a tool for implementation, and conjuring the intention of an employee in Islamic banks receives reward for it, because he fights an illegal system, which is usurious loans.
Source: Al Jazeera