Topic: An Argument Against The IBB (Read 1953 times)

If you change the name of a thing, the thing doesn't change.

Calling interest "rental charge" or whatelse doesn't make the fact that it is still interest change.

Sure, maybe god is happier if you don't call it interest but it's the same

so you concede then , thank you 

many are losing their money in lending section , last 5 months no loan defaults

ahh ok. Well yes if you have a secure way of generating income by other means, a genuine 'interest free loan' is very attractive indeed. You are probably aware of loan 'default' percentages but for more of an idea:

http://www.thehardmoneypros.com/Top25_Largest_Banks_Defaulted_Loans.shtm

20%ish seems like the average, thats a lot of bitcoin to offset by other means

I understand what you mean, you can see the IBB reports in IBB thread on how we make money. We make around 5 BTC per month. Our business model at IBB is not to make money of interest free loans, but on other things such as Joint Ventures and bitcoin stock market (glbse.com)

your not the first to say the business model is doomed to fail, you need to start reading IBB thread from the start, this has come up many times.

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Now do you concede that the islamic mortgage , it is not interest they are charging (and its not clever wording) but its a partnership/joint venture deal ?

Not charging interest on loans sounds like a business model doomed to fail. Surely you need to charge interest (or 'rental charge' or whatever you want to call it) to make it worth your while and to cover the cost of people defaulting on the loan?

now i am aware of some banks calling themselves islamic, but really they aren't any different than conventional banks, and like you say have clever wording.

for us at ibb- islamic bank of bitcoin, we dont charge interest on loans, you can check and ask around for yourself

from the website :-

How does it work?

""" Unlike a conventional mortgage where the purchaser borrows money from a lender which is then repaid with interest, the BTLPP uses the Islamic finance principles of a Co-ownership Agreement (Diminishing Musharaka) with Leasing (Ijara).

Your monthly BTLPP payment is made up of two elements: an acquisition payment and a rental payment.  When all acquisition payments have been made and the finance has been settled, ownership of the property transfers to you. """

its not interest , because its rental payment + acquisition payment, now if you want to continue calling that interest that is your choice, but know that islamic finance rules are being followed, that's the difference, islam is not against making trade/profit/business, the more you own of the property , the less you pay for rent.

--> you have to remember, this islamic mortgage is actually Musharakah :-

Musharakah

Musharakah (joint venture) is an agreement between two or more partners, whereby each partner provides funds to be used in a venture. Profits made are shared between the partners according to the invested capital. In case of loss, no partner loses capital in the same ratio. If the Bank provides capital, the same conditions apply. It is this financial risk, according to the Shariah, that justifies the bank's claim to part of the profit. Each partner may or may not participate in carrying out the business. A working partner gets a greater profit share compared to a sleeping (non-working) partner. The difference between Musharaka and Madharaba is that, in Musharaka, each partner contributes some capital, whereas in Madharaba, one partner, e.g. A financial institution, provides all the capital and the other partner, the entrepreneur, provides no capital. Note that Musharaka and Madharaba commonly overlap

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Musharaka

Musharaka is a word of Arabic origin, which literally means sharing. In the context of business and trade, it means a joint enterprise in which all the partners share the profit or loss of the joint venture. It is an ideal alternative for the interest-based financing with far reaching effects on both production and distribution. In the modern capitalist economy, interest is the sole instrument indiscriminately used in financing of every type.

Musharaka or Shirkat-ul-amwal is a relationship established by the parties through a mutual contract. But there are certain ingredients which are peculiar to the contract of mMusharaka, namely the role of each partner, the profit allocation and distribution scheme and the tenor or time of the Musharaka, whether mutanaqisa or mutlaqa.

Distribution of Profit
The proportion of profit to be distributed between the partners must be agreed upon at the time of effecting the contract. If no such proportion has been determined, the contract is not valid in Shar’iah.

The ratio of the profit for each of the partner must be determined in proportion to the actual profit accrued to the business, and not in proportion to the capital invested by him. It is not allowed to fix a lump sum amount for any one of the partners, or any rate of profit tied up with his investment. Losses, however are assumed according to the proportion to the capital invested by each partner.

Diminishing Musharakah

Diminishing Musharakah is a form of partnership, which ends with the complete ownership of a partner who purchases the share of another partner in that project by a redeeming mechanism agreed between both of them. Diminishing Musharakah is used mostly when one party who wants to own an asset or a commercial business which does not have adequate funds to pay the full price; and takes the assistance of financing from another party. The share of the financier is divided into a number of units and it is understood that the client will purchase the units of the share of the financier one by one periodically, thus increasing his own share till all the units of the financier are purchased by the client so as to make him the sole owner of the asset. In this kind of partnership, all partners are co-owners of each and every part of the joint property or asset on a pro-rata basis and one partner cannot make a claim to a specific part of the property or asset leaving the other parts for other partners. http://www.financialislam.com/diminishing-musharakah1.html

so really you are not borrowing money , you are entering into a partnership that follows islamic rules , now you understand why its not called interest and so its not clever wording here ?

I don't entirely dislike it, infact some of it sounds very commendable (not investing in unethical companies such as Alcohol and gambling etc.) I was just disappointed more than anything to realise that the claim of 'no interest' is merely clever wording...

If you don't like Islamic Banking then don't engage in it as all this thread is doing is more advertising for IBB 

Exactly, I was intrigued in the concept of the islamic 'interest free' system so I checked out the mortgage terms of the Islamic Bank Of Britain http://www.islamic-bank.com/personal-banking/buy-let-standard-product/

Basically you repay the loan + an extra 4.19% interest for a fixed rate, except they call the interest 'rental payment'

You can call it anything you like but it's STILL INTEREST! Ridiculous!

The article doesn't even talk about Islamic banking, just politics in France.

If you're trying to spread FUD, at least put some effort into it. 

+1 to this

also lol at 0% interest BUT there are other fees that are like interest but are not interest so god is happy and you don't go to hell

Infact, why would you want a bitcoin bank full stop? The only reason I keep my money in the bank is because my employer wont pay me in cash and banknotes floating around the house isn't very safe.. isn't the whole point about this p2p currency technology that we have a chance to rise above the banking system and it's charges and fat cat bonus payouts?

lol I don't know who atlas is as I havn't used this forum much but if you're insinuating that I'm a former member trying to cause trouble I can assure you my question was genuine. (I'm agnostic but respectful of peoples faith btw) I simply mean that 'an Islamic bitcoin bank' would be exactly the same as a 'Christian bitcoin bank' or a 'Hare Krishna bitcoin bank' wouldn't it?

My first reaction too.

I am pretty sure this is Atlas again ...

It would be sensible if Pastafarianism had a widely-adhered-to stance on lending practices.

Atlas, please get lost. No one wants you here and you've already been perma-banned twice now.

A bitcoin bank based on religion? Not really sure I understand this.. I mean what is the difference between the 'Islamic bitcoin bank' and ..say.. the 'flying spaghetti monster bitcoin bank' ?

I <3 IBB and Im an Catholic born Agnostic.

He was comparing the sub-prime mortgage crisis and the credit crunch problem to the IBB because it has 0% interest.