Digital banking, now halal
restofworld.org
restofworld.org
>> "New fintech startups must present themselves before the Indonesian Ulema Council .. composed of religious clerics"
But later we learn LinkAja "building the first Sharia mobile money product in Indonesia". So obviously thats not exactly true.
>> embedded in the DNA of the app was Fatwa No. 116 and the fingerprints of three Sharia clerics.
Well obviously. If you want to build a halal certified banking product it has to be implement syariah principles, thats the point.
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For context the banking system here is dominated by conventional banking, with syariah banking assets tiny in comparison (Rp424 trillion Vs Rp7.4 quadrillion [0]). There is demand for Syariah products, Indonesia has the largest muslim population in the world, hence LinkAja and others looking at it as a way to service this demand. Some people build syariah products for a desire to see Syariah financing implemented as they believe its better, some as its core to their beliefs, some for money.
The VP supports syariah banking, of course. But for context in reality Its a bit of struggle for them (hence the big initiatives), ie not some secret agenda being forced from above.
As for the merits of syariah VS conventional you'll need to research yourself. And if you really want to -OMG- talk to an islamic scholar then fire ahead. You wont exactly get far ignoring one side of the debate. There is also an interesting discussion on whether "regular" syariah banking products are normal ones wrapped in a compliant way, as others have touched upon here. And of course a macro-discussion on the problems with financing & banking ethics by people of all & no faiths.
[0] https://databoks.katadata.co.id/datapublish/2019/09/20/berap....
Just opinion, but I think as with most beliefs people aim to adhear in general but maybe not to the letter where not practical. Eg. a bitcoin enthusiast who has a conventional mortgage :)
If given the choice, I think people would favor banking products that fit their beliefs, but weighed against other factors. One of the limits on growth of syariah financing here for example is that it sometimes tends to be more expensive than traditional.
Unfortunate that rules that seemed to have been designed to be fairer to those borrowing ended up making them more expensive.
Do normal credit cards there not have cash back benefits? Do credit cards exist or because naturally they would charge you interest, do they not exist? It's interesting how there's a whole different ecosystem of apps in the part of the world that most of the world lives in.
Digital wallets must not be something akin to the Discover or Charles Schwab app on your phone, I recall hearing about them because there was an MLM ponzi scheme in Vietnam recognized last month where users would receive 80% cashback on paying bills and you'd receive more depending on how many friends you onboarded (with the app having a $100 minimum deposit to open an account). I don't know how that doesn't instantly seem too good to be true, then again I guess MoviePass seemed too good to be true.
I'm not familiar with how credit cards work there, but from my point of view cash-back benefits aren't all that widespread. Aside from AmEx I'm not familiar with any such arrangement available in France. And even AmEx is pretty much a joke, you'd have to spend an enormous amount of money every year just so that cashback could reach the price of the card.
https://www.mastercard.co.uk/content/dam/mccom/en-gb/interch...
https://www.mastercard.us/content/dam/public/mastercardcom/n...
https://www.adyen.com/blog/all-you-need-to-know-about-the-eu...
The digital wallets are stored value. So kind of like a very limited bank account. Without registering your ID you can put money in there and purchase things online or at point of sales. With extra KYC (Your ID etc) you can store more money in there and transfer it to friends. But the limits are small (<$300) even for the KYCd accounts.
The digital wallets themselves though are in general part of large "super" apps, kind of like uber + supermarket delivery + parcel delivery and a whole host of other services. Big players include Gojek & Grab, which started as ride-hailing.
The cashback is to attract new users, its pretty rare nowdays though as the wallets tighten their belts. You used to get cashback at point of sale, but it was never a huge amount (typically $2-3). The general idea was to use cashback to encourage daily usage, gradually weaning people off them as they started to become dependant on the other services I mentioned.
Digital wallet is recognized as such: 1. User “lend” money to the digital wallet provider when they top up, say $100 2. The money is used for any kind of things as it enters the circulation of the wallet provider, it could be invested, it could be loss 3. When wallet provider provides cashback, say they spent $100 then they obtained back $10 4. The $10 is considered as interest because now the user have $110 on their wallet (the $100 already spent though) - despite they only “lend” the wallet provider $100.
Conventional bank and conventional credit cards exist in Indonesia, some provides cash back and other kind of rewards. So yes, it does exist.
Does the Arabic word "riba" mean interest or excessive interest? Interest being 1-10% example and excessive one being upwards of 36%?
One question that no one is able to answer me, how does doing business, investing time and skill earn you "profit" while spending that same time and skill in investing your money and getting rewards is called "interest" and that gets shot down?
For someone who has spend some time trying to wrap my head around the Islamic banking concept, all I have come to understand is that this is just a feel good scheme to bring Muslims into the conventional banking fold by any means necessary.
The difference is profit/loss guarantee. If as OP said you invest your money, you are bound by risk of either losing your money or making a profit. On the other hand, your money sitting on the bank account earning interest while you are not at risk of losing, but only of profiting is considered haram.
https://www.livemint.com/news/india/just-how-safe-is-your-ba... https://www.telegraphindia.com/india/pmc-bank-crisis-money-s...
please tell me how do you see this as "only of profiting is considered haram"?
I wrote in the earlier comment, unless you have done work with banks, eveyone says there is 0 risk to lender but that is just false. why does the word foreclosure exists with banks? and debt collectors? the premise of halal banking is wrong. write it as shariah compliant banking and i will be happier, i will still NOT work with it though because it is just sneaky.
look dude, i am a professional who has to work with businesses as his day job and been doing that for years. let me tell you unless there is some tragedy or accident, a business is guaranteed to earn profits. its not speculation that you dont know if you will flip your money 2x or loose it all. that is gambling. real businesses is pushing profits up day in and out.
When you deposits money, bank might offer you annual interest of 1%. No matter what happened, whether the bank is at loss or not, you get the 1%. This is riba. If the purpose of the deposits is to be used as investment, then it must be clear from the beginning and there would be risk of loss.
When bank lend money to a person, bank asked for an interest of say 5%, bank does not care if the person is profiting or not, they will get their additional 5%. This is riba. Lending in islam is a social activity and no profits should occur from it. Would there be risk for lender? Yes. Would it means they can profits from it? In Islam, No.
I am not confident with the premise that you said a business is guaranteed to earn profits. I’ve seen business rise and fall, pre covid and after covid. I’ve started some of my own business and some got profitable and some doesn’t, some were profitable in the beginning, some started to see declines.
I don’t understand what is sneaky about sharia law for banking, it prevents anyone from being unfair and that anyone know the risk from a transaction, and that no one should profits from their partner loss and that loan shall not be profitable.
Credit card that charges interest/fee is already considered riba in Islam, no need to go into the cash back situation as it is already forbidden in the first place.
The Al Quran clearly answers your questions. “God forbids riba and permitted trade/business”. Riba had 0 risk for the lender, while investment/trade/business has risk. It is unfair to invest but only wanted profits, in business there’s a risk of loss, and there’s a chance of profits. Investing time and skills, or money for other business is allowed. No one would label it riba. When you starts being unfair by investing and you wanted only profits in return, without risk of loss - then that’s loan, not investment.
The etymology definition of riba is interest, but the actual ruling around it and the law is very complex.
I agree that some financial institutions are just using the label Sharia and Halal while in actualities it is just conventional banking.
> It was narrated that from 'Ata' bin As-Sa'ib, from Ash-Sha'bi who said: The Messenger of Allah [SAW] cursed the one who consumes Riba, the one who pays it, the one who writes it down, and the one who withholds Sadaqah (Zakah). And he used to forbid wailing (in mourning for the dead).
Sunan an-Nasa'i 5105
It is still forbidden if that card has a introductory 0% APR or you intend to pay the balance in full because you are signing a contract which can required you to pay riba.
https://islamqa.info/en/answers/13725/using-credit-cards-is-...
The difference is, for example, that they don't charge interest. They can't indulge in some particularly risky or speculative transactions. There's actually a whole long list of requirements, such as not selling debt, that are derived from these basic prohibitions against interest taking and against excessive risk. So because of those specific rulings, they have to design the transactions in slightly different ways.
For example, rather than borrowing money to buy some goods, they'll have the bank buy the goods and then resell the goods to the customer, so the bank becomes involved as an owner at one stage of the transaction. That makes it lawful, from the Islamic perspective. Whereas if the bank lent the money to the customer, that's an interest-bearing loan, and that's not allowed. So they use slightly different routes, typically involving ownership of goods at some point, to achieve finance."
https://www.theguardian.com/commentisfree/michaeltomasky/201...
Although this comes in many different flavors. And, of course, despite everything sounding nicer ("partnership"), it is in fact a much worse position for the buyer to be in.
An example of islamic finance "without interest": you want to buy a house, and repay your "non-loan" over 30 years. You put down a 10% downpayment.
The bank purchases the home, immediately increases the price by the full interest (let's simplify that calculation to 30yearly interest rate/2, so let's call it 50% for 30 years at 4%) then leases it back to you, and if you run out the lease they promise to transfer (for an additional fee) the ownership of the property to you. This is called a "partnership". This is illegal in most of the world, because it's exploitative. Why?
1) you are charged all interest on day 0
2) if you fail to pay, the property is in the hands of the "not-" bank that will kick you out, you will STILL owe them, generally more money than was to be repaid for you to get the property
3) if the *bank* gets into financial trouble you will lose your house
4) there are none of the normal protections (such as maximum interest rates, limits on administrative fees, ... and technically 2) is also an example of lack of protections)It is similar to a seller buying some cars for $10k each, and sell them on their dealership for $15k each. They can provide installment payment for the buyer and sell it for $20k each and they can pay it per month for $500. The difference between price is not loan/interest, its their profits.
Then I assume 2 would no longer be a risk? Bank owned the property, if you failed to pay bank will sold it to someone else who can pay, bank will then return your money if it sold higher than the set price.
Point is 3 is a weak contract issue, when you made the purchase, the contract should be clear that bank can not seize the house unless you failed to pay. If the contract says bank can cancel the transaction however they want or whenever they have issue, no one would want to do business with them. Imagine accepting a project but we put the terms, we can cancel the project and not return your money if we have issues with it.
Again 4 is also a contract issue, we have to draft the contract to make it feasible for both parties. It is basically an installment, you buy $100k house for $100/month. That’s it, the values are clear, the monthly payment will not go higher or lower, you can even pay the remaining directly with hard cash on the next month if you want.
A lot of states are working to outlaw these deals, because for these reasons and others they are considered abusive.
Best of luck!
Stay very, very far away from these types of loans is the best financial advice here.
And, come on man, really, is it that amazing that financial advice from 1500 years ago is a little bit out of date ? Yes, the Jewish and Roman empires experimented a lot with interest rules and had some very bad experiences doing that, especially in the provinces, so yes, they considered it evil at the time Islam was created. Great. They also considered straight lines evil for a thousand years (not joking about the straight lines) ... And while both pieces of advice have some validity to them, they should be reevaluated when practical.
It seems weird to pronounce that you detest it in general since it's not a monolithic thing and is more of a general concept encompassing a law tradition informed by a moral/religious framework.
https://bridge.georgetown.edu/research/factsheet-sharia/
https://ing.org/a-closer-look-at-sharia-in-the-united-states...
Not really, there are no punitive consequences for merely being attracted to the same sex, but there are for acting upon it publicly. Furthermore the law doesn't interfere with what's private nor is it allowed to breach the individual's privacy. Someone who doesn't wilfully disrupt the social order should have no problems in that regard.
I think reductionist views can be slightly misleading sometimes.
That's describes a "moderate" Sharia regime.
https://en.wikipedia.org/wiki/LGBT_rights_in_Egypt#Living_co...
And here's a more typical conservative regime. I guess I'll leave it to the reader to decide whether it's you or me who are being absurd.
FWIW, I have no problem w/ Muslims practicing their faith as private citizens. When the government of a country becomes dominated by a religion, though, I have a problem with that. And that goes for Christian theocracies too, although those are much less common these days.
You seem to have wilfully ignored that part, since neither you nor the article you linked addressed or opposed that part.
Interesting change of rhetoric after being called out, since you formulated the bizarre question "where sodomy is allowed when it occurs in private?", before having the epiphany that "Of course the law can never punish anyone for a crime that isn't detected"
> But by that definition murder and rape are "legal" everywhere in the world, as long as they occur "in private."
You are really going out on a limb to make nonsensical statements. The law has quite naturally limits, one of them being: the inability to judge events that it can't detect or reach. “Covenants, without the sword, are but words and of no strength to secure a man at all.” ― Thomas Hobbes, Leviathan Law needs to be enforced by humans, who can only do so if they can perceive that event.
>Under that notion of privacy there has never been a time in history where sodomy or any other sexual act was forbidden.
Same point, limits of law.
> IMO this is not a useful way of thinking about legality or oppression.
What some consider 'oppression' today was the norm globally. The problem is moral realism/anti-realism, since you can't prove your moral value judgments with science they will remain subjective and thus naturally be opposed.
Or it's illegal, and it will be punished if discovered.
If the claim is that sodomy in private is legal, there's a simple test: What happens if (government or private) surveillance catches evidence of it, a third-party steals and publishes private letters discussing it, ...?
Nonsense, so it's illegal then, full stop. It doesn't become legal just because it's private, when by discovering it is punished. The law just can't enforce the ruling when it can't detect it in the first place.
>If the claim is that sodomy in private is legal
You failed to read properly, no where did I or the other guy state that it is legal in private. The argument was about the limits of the law about events it can't perceive.
Please quote the part where anyone of us made that alleged claim.
> You failed to read properly, no where did I or the other guy state that it is legal in private. The argument was about the limits of the law about events it can't perceive.
They said: "Furthermore the law doesn't interfere with what's private". If that indeed was to mean "it's fine as long as you do not get caught", that's a pretty pointless argument when discussing laws - because that is indeed true of pretty much all laws. E.g. "Someone who doesn't wilfully disrupt the social order should have no problems in that regard." suggests that's not what's meant though, but rather that indeed as long as you don't do anything public (which might "disrupt social order") you are fine. Which AFAIK is the case in some places re religious practice: you can be of the "wrong" or no religion, practice it in private circles, but don't do anything public.
Wrong again, I stated several times that it's about the limits of law, yet you still keep ignoring the answer and asking if I meant X or Y. It's not 'pointless' because the hyperbolic statement about being punished just for 'existing' was made. At least try to be more charitable in your biased interpretation for the sake of civility.
>Someone who doesn't wilfully disrupt the social order should have no problems in that regard." suggests that's not what's meant though
I don't even see the how your inference makes any sense here. AGAIN it is about the LIMITS of the law, if you keep something private no one can punish you, but if you wilfully disrupt the social order it will have consequences in any place of the world.
> but there are for acting upon it publicly.
So a discussion of acting on it non-publicly (=in private) is IMHO very well relevant, but you clearly interpreted the gist of jediminds argument differently than asdfasgasdgasdg and me, but that doesn't make the nuance bizarre.
You are really confused, it was "LatteLazy" who made the hyperbolic statement, not jedimind.
>So a discussion of acting on it non-publicly (=in private) is IMHO very well relevant, but you clearly interpreted the gist of jediminds argument differently than asdfasgasdgasdg and me, but that doesn't make the nuance bizarre.
There is nothing bizarre about it, what's bizarre tho is jumping into a discussion without having studied the root issue & the development of the discussion and in consequence failing to understand simple arguments.
> In response to that "hyperbolic statement" jedimind
Note the lack of a "by" before "jedimind".
I disagree, much confusion. I can't see any hyperbole in the statement you quoted.
I'm afraid no amount of appeal to the evils of moral relativism are going to be enough to convince me that homosexuality is legal in most countries where the judgments of sharia courts are routinely enforced by the government.
That doesn't even make any sense. I am not trying to convince you of anything, all I did was educate you on the facts and I pointed out the inconsistencies in your arguments.
Actually there is in many countries, including many claiming to run sharia law systems.
https://en.m.wikipedia.org/wiki/LGBT_rights_in_Saudi_Arabia
There are similar articles for dozens of other countries.
Can you cite one from your linked article that fits your classification and contradicts his argument? I couldn't find one fitting in your classification.
The exchange between Bill Maher, Sam Harris, and Ben Affleck[0] is a great example of hamfisting Islamophobia into completely legitimate criticisms of Islam, Islamism, Sharia over secular society, etc. Not every criticism of Islam (and truthfully, the vast majority of criticisms of Islam) are not racist of Islamophobic.
A closer example might be the MPAA (US film rating group). It's a voluntary certification, but it's become a de facto requirement such that the small, opaque, non-government group shapes the level of violence (high) and nudity (low) in all TV and films.
Right or wrong I have always associated refusal to use traditional banking a more hard-line Muslim belief.
Edit:
For most Sharia fintech startups, MUI certificates are not only commercially advantageous but legally required by the Financial Services Authority of Indonesia (OJK), the state financial regulator. Other areas of the Sharia digital economy, like halal e-commerce and umrah sites, travel-booking platforms for Islamic pilgrimages, do not require this certificate.
So yes for fintech, maybe for ecommerce in general?
https://www.ojk.go.id/en/berita-dan-kegiatan/siaran-pers/Pag...
Participating in the Indonesian sharia finance economy would be more akin to something like organic certification on produce. Most farms are not organic but if you want to label your products as such then you have to undergo a certification process with an agency like the USDA. In this case to be certified Halal you have to gain the MUI certificate which is recognized by the OJK Financial Services Authority of Indonesian. However, an Indonesian person is likely better person to clarify this more precisely.
>>Well obviously. If you want to build a halal certified banking product it has to be implement syariah principles, thats the point.
Nowhere does it say that most fintech startups, let alone most finance, are are seeking that classification.
Absolutely not.
It specifically applies only to Muslims, while excluding others (known as dhimmi, which translates to something like "protected people"). Others have protected rights to live, have property, and freedom of religion, and in exchange they're expected to respect the authority of the State and are subjected to different taxes (jizya tax). Everything else depends on the implementation.
It's basically how you get a vibrant expat community in places like Dubai.
I'm not sure why he refuses to accept the fact that he might be wrong in this instance, though. I've seen him talk about other topics with Maher before and he's not nearly so bombastic or hard-headed.
I saw an interesting interview with Harris shortly after this where he said everyone was shocked that Affleck inserted himself into the conversation this way as well. I haven't seen many episodes of this show but apparently this segment is always a one-on-one between Maher and the guest in question, usually talking about whatever book or movie they're promoting, and given Ben's relative frequency on the show prior to this, he was aware of that.
Not surprising that their fanbases and communities loyal to them are going to jump on this far more than necessary. It doesn’t matter if Affleck didn’t do a horrible job in that scene, the reaction wasn’t going to be that much different from Harris’ fans.
I think there are some dusty luxury cars at Dubai airport that beg to differ
Sharia finance does use interest. They just call it something different. There is no difference between me buying a $100 product using a loan, and paying the bank $110 in total (Western banking), compared to the bank buying the product for $100, and charging me $110 for it (Sharia banking). The fact that it's different words doesn't mean it's not interest.
With loan, bank will use a court system to get back its money, and court can size your other property to return your debt, and by the power of small text your fines can unexpectedly outsize the price of the product by one or few orders of magnitude. With Sharia banking you will never pay more than these 110 dollars, and if you fail to pay them, the bank will size that product without using the court as it is legally a property of the bank unless you paid these 110 dollars.
(Warning: I am not a lawyer.)
reminds me of https://en.wikipedia.org/wiki/Eruv
The implementation of it is opened for the interpretation of the experts based on the basis of this particular distinction.
Fun fact, Muhammad was a very successful businessman and has been doing international trading to Sham (modern Syria) since he was a very young boy. He managed to retire from business before he is 40 years old and it is due to his business success not because that he is married to his first wife Khadijah. Basically he is a business startup founder with Khadijah as one of his main VC partners.
If I loan you $50, and ask for 10% interest, you must pay be $55. That $5 comes from somewhere. In a physical money economy, that literally means it comes out of someone's pocket in some way (starting a business etc.). You can imagine that if we have many many loans overlapping, over long periods, we might begin to have a money deficit.
To be honest, I don't have the proper expertise to explain it perfectly. But I hope that it gives an intuition.
No. the interest is just a claim on part of real production. Creditors would buy some products or services from debtors and that is where $5 came from.
https://www.cato.org/policy-report/julyaugust-2011/deficits-...
(I realise limiting the money in circulation to $52 is an absurd formulation, but using these crazy limits helps understand the larger system)
The difference between real growth and the amount of currency is the "metabolism" I referred to earlier.
First, central banks usually send any profit they make to their governments. (See eg https://www.google.com/search?q=fed+profits+to+treasury for lots of examples.) The governments then spend the money. There's no endless accumulation.
Second, there were long stretches of time in the past when inflation was zero or even negative. Have a look at the so called 'Long Depression', a period of rapid productivity growth in the latter part of the 19th century. Just look electronics usually fall in price these days, almost everything slowly fell in price back then over long periods of time.
But banks were just as 'evil' as they are now, and people paid interest.
Third, money doesn't have to be based on debt, either.
Historically money based on commodities was common. But in Japan their central bank recently bought stocks in return for newly 'printed' money. There's no obligation on anyone to ever buy the stocks back from the central bank.