Question

Though the industry of Islamic banking and Finance has been growing for the past 30-40 years, some Shariah scholars have openly refused to accept its role on both levels:

a) Macro level (there can be no Islamic banking and finance under a Conventional Central Bank)

b) Micro level (products such as Bay’ Einah, Tawarruq etc are nothing but legal tricks and a backdoor for Riba).

Based on your knowledge, provide four arguments (two on Macro and two on Micro levels) either to support or refute the above statements.

Answer 1

Conventional central banks use the interests which are charged to the lenders and also interest on the investment as an turnover of income,whereas,islamic banking are solely based on islamic teachings and laws of syariahv even in their banking procedures.these are the determinants of their profits rates and do not bother about interest rates.conventional banking are prohibited under islam.Interest is the main circle of concern of the conventional banks.transactions which include interest are primarily the pillars of conventional banking.But islamic banking do not consider interest.they are not based on transactions involving interest.this banking based on interest are not granted as per shariah.some find islamic banks comparatively less cost effective but at the same time the islamic banks maintain a higher quality of the assets.
Islamic banking are mainly concerned with the profit and loss sharing.these profits are based on resources sharing.Also customers have low cost as there is no liability of interest on loan or repayment time delay.hence market witness a stability and consistency.Islamic banks buy their products on deffered payment basis and then sell it on liquid cash.hence the objective of the buyers for purchasing the commodity is to fulfill its objectives for gaining liquid cash for repayment of debts and other requirements.sale of credit commodity and then repurchasing it for cash in a amount comparatively low.