Granting Facilities in Islamic Banking (Book): Difference between revisions
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=== 4. Installment Sale Contract === | === 4. Installment Sale Contract === | ||
In the author's belief, installment sale | In the author's belief, installment sale is a new phrase for an old transaction, because it is a type of credit sale (Bay' Nasi'ah) where the sold object (Mabi') is sold now and all or a portion of the price (Thaman) is paid later in known installments and over a specified period. It is clear that the price of a credit-sold object is higher than a sold object that is sold in cash; this contract is considered one of the most widely used facilities in the banking facility granting system (pp. 102-106). | ||
'''Critique of Installment Sale Transactions in the Banking System:''' From the perspective of this research, the rate of installment sale (credit) could, due to two characteristics—the profit being known and its being definitive—be introduced as the best alternative to the interest rate. However, determining the installment sale rate in practice based on the interest rate has seriously challenged this optimism (p. 109). According to the executive directive for housing installment sales, banks are obligated to receive an amount as a down payment in cash before the contract, whereas before the contract, an advance receipt will have no relation to a transaction that will be carried out later (p. 110). | '''Critique of Installment Sale Transactions in the Banking System:''' From the perspective of this research, the rate of installment sale (credit) could, due to two characteristics—the profit being known and its being definitive—be introduced as the best alternative to the interest rate. However, determining the installment sale rate in practice based on the interest rate has seriously challenged this optimism (p. 109). According to the executive directive for housing installment sales, banks are obligated to receive an amount as a down payment in cash before the contract, whereas before the contract, an advance receipt will have no relation to a transaction that will be carried out later (p. 110). | ||
=== 5. Forward Sale (Bay' Salaf) === | === 5. Forward Sale (Bay' Salaf) === | ||
The researcher introduces forward sale (Bay' Salaf or Salam) as the opposite of credit sale (Nasi'ah), and in this regard says, a forward sale is buying a fungible entity (Kulli) with a term, in exchange for a cash price, contrary to credit sale, and the subject of the forward sale transaction consists of the cash advance purchase of products from production units in the industrial, mining, or agricultural sectors (pp. 112 and 114). | The researcher introduces [[forward sale]] (Bay' Salaf or Salam) as the opposite of credit sale (Nasi'ah), and in this regard says, a forward sale is buying a fungible entity (Kulli) with a term, in exchange for a cash price, contrary to credit sale, and the subject of the forward sale transaction consists of the cash advance purchase of products from production units in the industrial, mining, or agricultural sectors (pp. 112 and 114). | ||
'''The Problem with Salaf Transactions in the Banking System:''' Despite the positive effects that the Salaf contract has on the economy and in aiding producers, in practice, banks do not greatly welcome concluding this contract for various reasons. Among these reasons are: paying the entire price of the sold object before receiving the sold object might not be economically viable, the market for the goods might not be in the bank's favor in the future, there is a possibility that the goods are perishable, and banks must pay costs such as warehousing and insurance (p. 117). | '''The Problem with Salaf Transactions in the Banking System:''' Despite the positive effects that the Salaf contract has on the economy and in aiding producers, in practice, banks do not greatly welcome concluding this contract for various reasons. Among these reasons are: paying the entire price of the sold object before receiving the sold object might not be economically viable, the market for the goods might not be in the bank's favor in the future, there is a possibility that the goods are perishable, and banks must pay costs such as warehousing and insurance (p. 117). | ||
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According to the author's statements, stipulating a benefit (Naf') in a loan (Qardh) is considered usury (Riba), and the condition of excess, whether mentioned in the contract or stated implicitly within it, is usury and forbidden (Haram), and it makes no difference whether the excess is an entity ('Ayn), a benefit (Manfa'at), or an attribute (Sifah); in any case, it is usury and forbidden. The distinguishing point in this contract is that the capital in a loan is always circulating and, through this contract, is placed in the hands of someone who needs it (pp. 124 and 120). | According to the author's statements, stipulating a benefit (Naf') in a loan (Qardh) is considered usury (Riba), and the condition of excess, whether mentioned in the contract or stated implicitly within it, is usury and forbidden (Haram), and it makes no difference whether the excess is an entity ('Ayn), a benefit (Manfa'at), or an attribute (Sifah); in any case, it is usury and forbidden. The distinguishing point in this contract is that the capital in a loan is always circulating and, through this contract, is placed in the hands of someone who needs it (pp. 124 and 120). | ||
'''Critique of Loan Transactions in the Banking System:''' A considerable volume of the author's material is dedicated to critiquing the performance of banks in granting interest-free loan (Qardh al-Hasanah) facilities. The author believes that in many cases, the service fees received by banks exceed the real cost of the services; while according to the Usury-Free Banking Operations Law, costs must be calculated precisely and separately. Also, despite the determination of a customary fee rate between 2 to 4 percent by the Money and Credit Council, some banks receive up to 26 percent; an issue that some jurists consider an instance of usury (pp. 132 and 133). | '''Critique of Loan Transactions in the Banking System:''' A considerable volume of the author's material is dedicated to critiquing the performance of banks in [[granting interest-free loan]] (Qardh al-Hasanah) facilities. The author believes that in many cases, the service fees received by banks exceed the real cost of the services; while according to the Usury-Free Banking Operations Law, costs must be calculated precisely and separately. Also, despite the determination of a customary fee rate between 2 to 4 percent by the Money and Credit Council, some banks receive up to 26 percent; an issue that some jurists consider an instance of usury (pp. 132 and 133). | ||
The author also criticizes the lack of transparency in announcing the amount of the service fee and writes that in many cases, banks do not announce the exact amount of the fee before concluding the contract. This matter, since there is a possibility of the applicant withdrawing if informed of a high fee, conflicts with the principle of the parties' consent and leads to a contract involving risk/uncertainty (Aqd-e Gharari) (p. 133). Receiving a late payment penalty is also lacking a religious foundation in the author's view; because this penalty is considered a kind of discretionary punishment (Ta'zir), the determination of which is solely at the discretion of the religious ruler (Hakim al-Shar'), and its funds must be allocated to the public treasury (Bayt al-Mal), not deposited into the banks' accounts (p. 133). | The author also criticizes the lack of transparency in announcing the amount of the service fee and writes that in many cases, banks do not announce the exact amount of the fee before concluding the contract. This matter, since there is a possibility of the applicant withdrawing if informed of a high fee, conflicts with the principle of the parties' consent and leads to a [[contract involving risk/uncertainty]] (Aqd-e Gharari) (p. 133). Receiving a late payment penalty is also lacking a religious foundation in the author's view; because this penalty is considered a kind of discretionary punishment (Ta'zir), the determination of which is solely at the discretion of the [[religious ruler]] (Hakim al-Shar'), and its funds must be allocated to the public treasury (Bayt al-Mal), not deposited into the banks' accounts (p. 133). | ||
Subsequently, the author points to other flaws such as the incomplete allocation of interest-free loan resources, the condition of opening an account and blocking a part of the deposit, deceptive advertisements with prizes, and strictness in granting loans to needy strata, and considers them contrary to the spirit of usury-free banking (pp. 131–136). | Subsequently, the author points to other flaws such as the incomplete allocation of interest-free loan resources, the condition of opening an account and blocking a part of the deposit, deceptive advertisements with prizes, and strictness in granting loans to needy strata, and considers them contrary to the spirit of usury-free banking (pp. 131–136). | ||