Granting Facilities in Islamic Banking (Book): Difference between revisions
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== Introduction and Structure of the Book == | == Introduction and Structure of the Book == | ||
The book "Granting Facilities in Islamic Banking" is the result of research by Fatemeh Moghimi'an, published in Persian by Khorsandi Publications in 2020 (1399 SH). Moghimi'an holds a master's degree in Islamic jurisprudence and law. | The book "Granting Facilities in Islamic Banking" is the result of research by Fatemeh Moghimi'an, published in Persian by [[Khorsandi Publications]] in 2020 (1399 SH). Moghimi'an holds a master's degree in Islamic jurisprudence and law. | ||
This book is organized into three chapters. The first chapter examines participatory contracts in the granted facilities under the Usury-Free Banking Operations Law (p. 19). In the second chapter, the exchange contracts existing in the Usury-Free Banking Operations Law regarding the granting of facilities are examined (p. 59), and the third chapter is dedicated to the loan contract ('Aqd al-Qardh) through which banks grant facilities to applicants (p. 119). | This book is organized into three chapters. The first chapter examines participatory contracts in the granted facilities under the Usury-Free Banking Operations Law (p. 19). In the second chapter, the exchange contracts existing in the Usury-Free Banking Operations Law regarding the granting of facilities are examined (p. 59), and the third chapter is dedicated to the [[loan contract]] ('Aqd al-Qardh) through which banks grant facilities to applicants (p. 119). | ||
== Participatory Contracts == | == Participatory Contracts == | ||
In examining participatory contracts (Uqud Musharakati), the author emphasizes that in these types of contracts, the bank provides the necessary capital to launch an economic activity and shares the resulting profit with the customer. The main characteristic of these contracts is the prohibition of determining a definitive profit before the end of the activity, and only determining the profit ratio between the parties is permissible. | In [[examining participatory contracts]] (Uqud Musharakati), the author emphasizes that in these types of contracts, the bank provides the necessary capital to launch an economic activity and shares the resulting profit with the customer. The main characteristic of these contracts is the prohibition of determining a definitive profit before the end of the activity, and only determining the profit ratio between the parties is permissible. | ||
=== The Mudharabah Contract === | === The Mudharabah Contract === | ||
In the discussion of sleeping partnership (Mudharabah), the author considers it a revocable contract (Aqd Ja'iz) in which the capital is from one side and the labor from the other, and the potential profit is divided between them. Mudharabah in banking operations is implemented in such a way that the bank is the investor and the customer is the agent (Amil); the agent receives the capital, buys goods, and after selling, pays the agreed-upon profit to the bank (pp. 23–27). Among the characteristics of Mudharabah is its commutative (Mu'awwad) nature; meaning the agent provides a service, and in case of realizing a profit, the owner also has a share. However, this profit is not definitive, and in the absence of profit, the agent does not receive a substitute ('Iwadh). Also, the condition of determining a specific profit or absolving the owner from liability for loss is incompatible with the essence of the Mudharabah contract (pp. 24–26). | In the discussion of sleeping partnership (Mudharabah), the author considers it a [[revocable contract]] (Aqd Ja'iz) in which the capital is from one side and the labor from the other, and the potential profit is divided between them. Mudharabah in banking operations is implemented in such a way that the bank is the investor and the customer is the agent (Amil); the agent receives the capital, buys goods, and after selling, pays the agreed-upon profit to the bank (pp. 23–27). Among the characteristics of Mudharabah is its commutative (Mu'awwad) nature; meaning the agent provides a service, and in case of realizing a profit, the owner also has a share. However, this profit is not definitive, and in the absence of profit, the agent does not receive a substitute ('Iwadh). Also, the condition of determining a specific profit or absolving the owner from liability for loss is incompatible with the essence of the Mudharabah contract (pp. 24–26). | ||
=== Critique of Banking Mudharabah Transactions === | === Critique of Banking Mudharabah Transactions === | ||
The flaws related to banking transactions in the field of granting facilities based on Mudharabah have several parts, and an attempt is made to address the most important of these flaws. | The flaws related to banking transactions in the field of granting facilities based on Mudharabah have several parts, and an attempt is made to address the most important of these flaws. | ||
* The fictitious nature of the transactions: In the author's view, the first flaw in banking Mudharabahs is the fictitious (Suri) nature of many of these contracts; meaning their signing is not done based on the real intention (Qasd) of the parties. In most cases, the recipients of the facilities act merely to supply temporary financial needs and not to execute a real Mudharabah. Bank operators are also sometimes aware of this intention but overlook it. This is while the religious validity of the contract depends on the true intention of the parties (p. 31). If the borrower, without the intention of Mudharabah, acts merely to receive funds and repay them with an added amount, this act is considered usury (Riba); because the legitimacy of Mudharabah depends on its actual realization and not just the apparent signing of the contract (p. 31). | * The fictitious nature of the transactions: In the author's view, the first flaw in banking Mudharabahs is the fictitious (Suri) nature of many of these contracts; meaning their signing is not done based on the real intention (Qasd) of the parties. In most cases, the recipients of the facilities act merely to supply temporary financial needs and not to execute a real Mudharabah. Bank operators are also sometimes aware of this intention but overlook it. This is while the religious validity of the contract depends on the true intention of the parties (p. 31). If the borrower, without the intention of Mudharabah, acts merely to receive funds and repay them with an added amount, this act is considered [[usury]] (Riba); because the legitimacy of Mudharabah depends on its actual realization and not just the apparent signing of the contract (p. 31). | ||
* Determining definitive profit: The author considers one of the important flaws in the execution of banking Mudharabahs to be the determination of a definitive profit. According to the directive, the bank must insert the minimum and maximum expected profit into the contract according to the resolution of the Money and Credit Council, whereas the real estimation of profit must be done based on multiple factors such as the customer's experience, the type and price of goods, the duration of the sale, and the amount of capital. However, in practice, banks at the time of settlement only suffice with the minimum determined profit (p. 34). Also, although the predicted profit varies within a range, determining a specific percentage as the bank's minimum share in the contract can cause the Mudharabah to distance itself from its real and religious form (pp. 33-35). | * Determining definitive profit: The author considers one of the important flaws in the execution of banking Mudharabahs to be the determination of a definitive profit. According to the directive, the bank must insert the minimum and maximum expected profit into the contract according to the resolution of the Money and Credit Council, whereas the real estimation of profit must be done based on multiple factors such as the customer's experience, the type and price of goods, the duration of the sale, and the amount of capital. However, in practice, banks at the time of settlement only suffice with the minimum determined profit (p. 34). Also, although the predicted profit varies within a range, determining a specific percentage as the bank's minimum share in the contract can cause the Mudharabah to distance itself from its real and religious form (pp. 33-35). | ||
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=== Partnership Contracts === | === Partnership Contracts === | ||
Based on this research, "partnership" (Shirkah) in jurisprudence means the joint (Musha') ownership of several people in a property. In the Usury-Free Banking Operations Law as well, "civil partnership" | Based on this research, "[[partnership]]" (Shirkah) in jurisprudence means the joint (Musha') ownership of several people in a property. In the Usury-Free Banking Operations Law as well, "[[civil partnership]]" refers to the combination of cash or non-cash partnership shares of natural or legal persons to gain profit based on a contract. In this type of partnership, the bank can enter into a transaction with one or more partners, and the partnership share must be joint; meaning none of the partners owns a specific part of the property, rather all of them are partners in the whole of it (pp. 40–44). | ||
=== Critique of Banking Participatory Transactions === | === Critique of Banking Participatory Transactions === | ||