Are Islamic banks compliant with Islamic law behind the scenes?

[infomommax]

Hello everyone,
I am new to the finance scene and currently hold an account in a conventional bank (unfortunately).

I want to open an account with an Islamic bank, but as you all know the world of finance is quite opaque especially when it comes to a bank’s dealings with the central bank.

Does anyone have first-hand knowledge on Islamic bank operations and whether they are fully compliant with Islamic law? Eg. do Islamic banks receive interest from central banks on their deposits?

What do you look for in an Islamic bank when opening an account? I am also open to bank recommendations within the EU.

TIA

 

[daisies89]

@infomommax The prophet used to do business with non Muslims. He just ensured HIS business with them were halal.

So I don’t see the point of what banks do behind the scenes. If there are halal alternatives then fine. But I wouldn’t stress about it either.

 

[angeshekinahh]

@daisies89 Banks use your money to lend it out, invest in haram, create more money etc.

It is not allowed to have an account at a traditional bank, when there are Islamic banks in your country.

 

[prouddada]

@angeshekinahh It’s a big thing to say something isn’t allowed. Do you have a source?

 

[angeshekinahh]

@prouddada I have one from a scholar working at the Al-Azhar, but it is in German.

However, this is not something new. You can easily find plenty of Fatawa stating the same.

 

[prouddada]

@angeshekinahh I meant do you have something clear from the Quran or Hadith? There are lots of different scholars with varying view points on everything. The best thing to do is look at the information yourself and make your own decision so your niya / intentions are clear

 

[angeshekinahh]

@prouddada Sure.
In Surah Maidah verse 2, Allah tells us:
"And cooperate in righteousness and piety, but do not cooperate in sin and aggression."

 

[annache]

@angeshekinahh To take your idea to the limit, you would have to be a hermit.

 

[eternallykeptbyjesus]

@angeshekinahh Islamic banks are as involved in Riba as conventional banks. Using Islamic banks is further perpetuating Riba amongst Muslims rather than moving away from it. For this reason even though there are Islamic banks in the UK I refuse to use them. They are dishonest and deceptive.

That ayah says do not cooperate in transgression.

 

[angeshekinahh]

@eternallykeptbyjesus No, there are Islamic banks which do not use the funds of customers for anything, like conventional banks are doing.

 

[annache]

@angeshekinahh I cannot believe that. The business of banks is to intermediate funds from suppliers of funds to users of funds. Assets=liabilites + capital.

 

[eternallykeptbyjesus]

@angeshekinahh With respect, if they did not use or need the customer funds to lend money then they would not be banks. The whole definition of a banking licence (at least in the UK and thus I would expect little deviation globally) is that banks use customer funds to finance lending activity.
If they took customer deposits and just safeguarded them then they do not need a banking licence and would not qualify for one. If they just used their own money to lend then again they do not need nor qualify to obtain a banking licence.

 

[angeshekinahh]

@eternallykeptbyjesus It is an Islamic bank in Germany (KT-Bank).
They also "lend" money, so they need a bank license.
They do not use normal customer funds.

I think they use fixed-term deposits and maybe get money from their parent company (Kuveyt Türk, which is mostly owned by Kuwait Finance House).

 

[xypnios]

@angeshekinahh what about working in a traditional bank?

 

[angeshekinahh]

@xypnios Some scholars say that we are not allowed to work for a bank. No matter what your job is, even as a cleaner.
Some say that you can, as long as you are not directly involved in Riba transactions.

I would prefer the first opinion, because no matter what your job in the bank is, you are helping them in one of the biggest sins.
You will also get paid with likely 100% haram money.

 

[daisies89]

@angeshekinahh Again, the prophet used to do business with non Muslims that did haram stuff.

And again, I already said that if there are halal alternatives then that’s preferable.

 

[angeshekinahh]

@daisies89 It is not just preferable, it is compulsory to do so.

I am not in the position to come up with rulings.
Scholars and experts (who speak with scholars) tell so.

 

[daisies89]

@angeshekinahh If it was obligatory then the prophet wouldn’t have done business with the Jews of the time, right?

 

[angeshekinahh]

@daisies89 Did he lend money to Jews, who were known that they use borrowed money to lend it out to others with Riba?
Did he agree on the condition, that the Jew is allowed to do so?

 

[daisies89]

@angeshekinahh I’m not sure what you are arguing about.

If an Islamic bank exists, I already said it should
Be used.

The scholars have already ruled that using riba-based banks to safeguard money is okay if there is no other choice. You should not use the interest and should give it away to charity.