14 ms·

Digital banking, now halal

53 points by jbegley 6y ago

wrnr 6y ago
I've always wondered what a Data Protection Officer would do if they where born in a muslim country.
- teekert 6y ago
  What are your thoughts? What would be different then?
- jacobush 6y ago
  Would it matter where they lived?
TheUndead96 6y ago
I am curious about the events that have lead to the development of Sharia banking. It seems to be partly a shield against runaway interest/inflation. This has a parallel to the idea of usury in Christianity. Perhaps societies that avoid becoming too financialised have a better chance of survival?
- deleted 6y ago
  [deleted]
- vbezhenar 6y ago
  It is forbidden to lend money with interest in Islam. So they invented this thing which is exactly the same, but formulated with other words and so it's appropriate.
  - TheUndead96 6y ago
    Just to be clear I was not making a value judgement, just an observation. I find it compelling that many traditional societies have come to this principle. I personally think that removing interest from a money system could go a long way to stabilise it.
  - LatteLazy 6y ago
    I detest sharia law in general and the whole idea of a religious authority making rules others then have to follow but... There are subtle and important differences between Islamic finance and non Islamic finance and there are upsides to the Islamic approach. One example of this is that there is no chance of bankruptcy from debts or negative equity. This strongly encourages responsible lending.
    - runawaybottle 6y ago
      I don’t think this is specific to Sharia law, those rules on lending is for Islam in general. I think giving away 30% of your income to the poor every year is one of the five pillars of Islam as well.
      - fakedang 6y ago
        1.) Islamic law is the same as Sharia law 2.) It's 2%, and in the past often collected as tax.
        insulanian 6y ago
        It's 2.5%
        fakedang 6y ago
        Yeah, my bad. But still nowhere near the 30% mentioned by the original comment.
      - doesnotexist 6y ago
        There is no set amount or percentage dictated by the Quran. Usually the customary amount is ~2.5% of capital assets earned in a year. And apparently somewhere around 20% on mining income, which obviously is only applicable to small number of people who own interests in mining operations.
    - doesnotexist 6y ago
      Unfortunately mainstream undercurrents of islamaphobia/orientalism have hijacked the english use of an arabic word "Sharia" and made it into a knee-jerk scare word. 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://bridge.georgetown.edu/research/factsheet-sharia/ https://ing.org/a-closer-look-at-sharia-in-the-united-states/ https://ing.org/a-closer-look-at-sharia-in-the-united-states...
  - doesnotexist 6y ago
    "How is [Islamic finance] different from secular finance? 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/2010/aug/05/usa-islam-elena-kagan-sharia-nonsense https://www.theguardian.com/commentisfree/michaeltomasky/201...
    - candiodari 6y ago
      The do charge interests. Sorry, they "don't". They charge "administrative costs", percentual administrative costs that reoccur over time. 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)
  - pc86 6y ago
    A lot of folks seem to be ignoring this. 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.
    - candiodari 6y ago
      It is called/translated (percentual) administrative costs.
      - pfortuny 6y ago
        Yes, so interest. Just a replication argument.
    - anonymfus 6y ago
      There is a difference in what happens if you fail to pay these 110 dollars or if product is broken. 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.)
    - davchana 6y ago
      Yes, I had a personal loan in Qatar, for about 8% APR, but it was never listed as Interest in statements. It was always, maintenance charges.
  - gruez 6y ago
    >So they invented this thing which is exactly the same, but formulated with other words and so it's appropriate. reminds me of https://en.wikipedia.org/wiki/Eruv https://en.wikipedia.org/wiki/Eruv
- eru 6y ago
  Huh? What does interest have to do with inflation?
  - deleted 6y ago
    [deleted]
  - TheUndead96 6y ago
    Inflation is like the metabolism of an economy. Money represents work done in the past. Inflation means that work done further in the past is worth less than more recently. So $10 today is worth less tomorrow. Some economies have a faster metabolism than others. 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.
    - zajio1am 6y ago
      > If I loan you $50, and ask for 10% interest, you must pay be $55. That $5 comes from somewhere. ... You can imagine that if we have many many loans overlapping, over long periods, we might begin to have a money deficit. 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.
      - TheUndead96 6y ago
        Well imagine if there is only $55 worth of currency in circulation. Or better yet only $52. The lender ends up with all the currency in the end (and maybe some that does not exist yet). The response is that currency is printed. If the production of society increases at the same rate as interest, then there is no problem, but that is rarely the case. This is why there is more debt than money in the world. Currencies are then deliberately debased in order to pay back debt quicker. https://www.cato.org/policy-report/julyaugust-2011/deficits-debt-debasement 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.
- teleforce 6y ago
  I am not a finance or business expert but it is stated in the Quran that there is a clear distinction between "business" and "usury", where the former is encouraged but the latter is prohibited. 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.
JCharante 6y ago
I'm intrigued by how they (almost?) classified digital wallets as haram due to the cash back benefits which can act as a form of interest payment between businesses. 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.
- vladvasiliu 6y ago
  > 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. 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.
  - smnrchrds 6y ago
    That's because credit card interchange fees are much lower in France than they are in the US. Does the French government cap interchange fees? https://www.mastercard.co.uk/content/dam/mccom/en-gb/interchange/documents/France.pdf https://www.mastercard.co.uk/content/dam/mccom/en-gb/interch... https://www.mastercard.us/content/dam/public/mastercardcom/na/us/en/documents/merchant-rates-2019-2020-oct-2019.pdf https://www.mastercard.us/content/dam/public/mastercardcom/n...
    - 6y ago
LatteLazy 6y ago
It's sad that just as all the technology in smart phones is reaching people, so many places are clamping down and sacrificing all the benefits to keep control.
charliebrownau 6y ago
Makes sense , when ever ISLAM gets to a certain percentage of the population it replaces the ethnic native popuation, the goverment, the region, the courts and the LAW, banking is the next step This is why if you dont want your nation to run by Zionist Jews or ISLAMIC mulsims, dont let them in to begin with
lemparin2020 6y ago
This piece uses snippets of real information to play to a pre-existing agenda thats pretty easy to spot. So please dont jump to conclusions. For example: >> "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. == 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/berapa-aset-perbankan-syariah-dan-konvensional#:~:text=Pada%202018%2C%20aset%20bank%20syariah,81%25%20pada%202012%2D2018 https://databoks.katadata.co.id/datapublish/2019/09/20/berap....
- Bishop_ 6y ago
  Are you familiar with how muslims in muslim minority countries do banking? Are there sayariah banks / credit unions that I am simply unaware of due to my ignorance? Or do they simply not use banks? Or do most just not care about the rule as I think would be implied by conventional banking being more prevalent even in a country with as many muslims as Indonesia?
  - 6y ago
ckl1810 6y ago
Fascinating. Is Indonesia leading with these fintech refs in Muslim countries. Anyone aware of this type of oversight in other halal countries?

53 points by jbegley 6y ago

wrnr 6y ago

I've always wondered what a Data Protection Officer would do if they where born in a muslim country.

teekert 6y ago
What are your thoughts? What would be different then?
jacobush 6y ago
Would it matter where they lived?

TheUndead96 6y ago

I am curious about the events that have lead to the development of Sharia banking. It seems to be partly a shield against runaway interest/inflation. This has a parallel to the idea of usury in Christianity. Perhaps societies that avoid becoming too financialised have a better chance of survival?

deleted 6y ago
[deleted]
vbezhenar 6y ago
It is forbidden to lend money with interest in Islam. So they invented this thing which is exactly the same, but formulated with other words and so it's appropriate.
- TheUndead96 6y ago
  Just to be clear I was not making a value judgement, just an observation. I find it compelling that many traditional societies have come to this principle. I personally think that removing interest from a money system could go a long way to stabilise it.
- LatteLazy 6y ago
  I detest sharia law in general and the whole idea of a religious authority making rules others then have to follow but... There are subtle and important differences between Islamic finance and non Islamic finance and there are upsides to the Islamic approach. One example of this is that there is no chance of bankruptcy from debts or negative equity. This strongly encourages responsible lending.
  - runawaybottle 6y ago
    I don’t think this is specific to Sharia law, those rules on lending is for Islam in general. I think giving away 30% of your income to the poor every year is one of the five pillars of Islam as well.
    - fakedang 6y ago
      1.) Islamic law is the same as Sharia law 2.) It's 2%, and in the past often collected as tax.
      - insulanian 6y ago
        It's 2.5%
        fakedang 6y ago
        Yeah, my bad. But still nowhere near the 30% mentioned by the original comment.
    - doesnotexist 6y ago
      There is no set amount or percentage dictated by the Quran. Usually the customary amount is ~2.5% of capital assets earned in a year. And apparently somewhere around 20% on mining income, which obviously is only applicable to small number of people who own interests in mining operations.
  - doesnotexist 6y ago
    Unfortunately mainstream undercurrents of islamaphobia/orientalism have hijacked the english use of an arabic word "Sharia" and made it into a knee-jerk scare word. 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://bridge.georgetown.edu/research/factsheet-sharia/ https://ing.org/a-closer-look-at-sharia-in-the-united-states/ https://ing.org/a-closer-look-at-sharia-in-the-united-states...
- doesnotexist 6y ago
  "How is [Islamic finance] different from secular finance? 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/2010/aug/05/usa-islam-elena-kagan-sharia-nonsense https://www.theguardian.com/commentisfree/michaeltomasky/201...
  - candiodari 6y ago
    The do charge interests. Sorry, they "don't". They charge "administrative costs", percentual administrative costs that reoccur over time. 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)
- pc86 6y ago
  A lot of folks seem to be ignoring this. 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.
  - candiodari 6y ago
    It is called/translated (percentual) administrative costs.
    - pfortuny 6y ago
      Yes, so interest. Just a replication argument.
  - anonymfus 6y ago
    There is a difference in what happens if you fail to pay these 110 dollars or if product is broken. 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.)
  - davchana 6y ago
    Yes, I had a personal loan in Qatar, for about 8% APR, but it was never listed as Interest in statements. It was always, maintenance charges.
- gruez 6y ago
  >So they invented this thing which is exactly the same, but formulated with other words and so it's appropriate. reminds me of https://en.wikipedia.org/wiki/Eruv https://en.wikipedia.org/wiki/Eruv
eru 6y ago
Huh? What does interest have to do with inflation?
- deleted 6y ago
  [deleted]
- TheUndead96 6y ago
  Inflation is like the metabolism of an economy. Money represents work done in the past. Inflation means that work done further in the past is worth less than more recently. So $10 today is worth less tomorrow. Some economies have a faster metabolism than others. 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.
  - zajio1am 6y ago
    > If I loan you $50, and ask for 10% interest, you must pay be $55. That $5 comes from somewhere. ... You can imagine that if we have many many loans overlapping, over long periods, we might begin to have a money deficit. 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.
    - TheUndead96 6y ago
      Well imagine if there is only $55 worth of currency in circulation. Or better yet only $52. The lender ends up with all the currency in the end (and maybe some that does not exist yet). The response is that currency is printed. If the production of society increases at the same rate as interest, then there is no problem, but that is rarely the case. This is why there is more debt than money in the world. Currencies are then deliberately debased in order to pay back debt quicker. https://www.cato.org/policy-report/julyaugust-2011/deficits-debt-debasement 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.
teleforce 6y ago
I am not a finance or business expert but it is stated in the Quran that there is a clear distinction between "business" and "usury", where the former is encouraged but the latter is prohibited. 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.

JCharante 6y ago

I'm intrigued by how they (almost?) classified digital wallets as haram due to the cash back benefits which can act as a form of interest payment between businesses. 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.

vladvasiliu 6y ago
> 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. 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.
- smnrchrds 6y ago
  That's because credit card interchange fees are much lower in France than they are in the US. Does the French government cap interchange fees? https://www.mastercard.co.uk/content/dam/mccom/en-gb/interchange/documents/France.pdf https://www.mastercard.co.uk/content/dam/mccom/en-gb/interch... https://www.mastercard.us/content/dam/public/mastercardcom/na/us/en/documents/merchant-rates-2019-2020-oct-2019.pdf https://www.mastercard.us/content/dam/public/mastercardcom/n...
  - 6y ago

LatteLazy 6y ago

It's sad that just as all the technology in smart phones is reaching people, so many places are clamping down and sacrificing all the benefits to keep control.

charliebrownau 6y ago

Makes sense , when ever ISLAM gets to a certain percentage of the population it replaces the ethnic native popuation, the goverment, the region, the courts and the LAW, banking is the next step This is why if you dont want your nation to run by Zionist Jews or ISLAMIC mulsims, dont let them in to begin with

lemparin2020 6y ago

This piece uses snippets of real information to play to a pre-existing agenda thats pretty easy to spot. So please dont jump to conclusions. For example: >> "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. == 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/berapa-aset-perbankan-syariah-dan-konvensional#:~:text=Pada%202018%2C%20aset%20bank%20syariah,81%25%20pada%202012%2D2018 https://databoks.katadata.co.id/datapublish/2019/09/20/berap....

Bishop_ 6y ago
Are you familiar with how muslims in muslim minority countries do banking? Are there sayariah banks / credit unions that I am simply unaware of due to my ignorance? Or do they simply not use banks? Or do most just not care about the rule as I think would be implied by conventional banking being more prevalent even in a country with as many muslims as Indonesia?
- 6y ago

ckl1810 6y ago

Fascinating. Is Indonesia leading with these fintech refs in Muslim countries. Anyone aware of this type of oversight in other halal countries?