BANKING AND INVESTMENT BANKING

In the RF banking system, money is an important tool that must be respected and put to good use by investing it prudently. Growth of this money must not be done by looking at money as something that can reproduce as if it were rabbits without investing it in the community.

The RF bankers and customers believe that money must be earned in a proper way, as defined by the Judeo-Christian-Islamic Shari'aa law. There is one underlying holistic concept of producing income: the difference between halal, which means divinely lawful, and haram, which means divinely unlawful. “Making” money and eating from haram sources are believed to be the same as consuming hellfire, and those who do this will ultimately not prosper in this life and will be in the depth of hellfire in the hereafter, when we all face God's judgment.

The RF lifestyle, discipline, and banking systems believe that money must be invested in good and productive projects and services that will provide a better, healthier, more productive, more comfortable, and fair RF lifestyle for all.

Unfortunately, some in the community have different ideas about money. Money in the RF system is not considered a commodity that commands a price (interest), as in the riba-based system. It is unfortunate that people are led to believe falsely that money reproduces and gives birth to more money if rented at a price called interest rate. Money is a medium or a measuring device for transacting business. It is used to measure the efficiency of doing business through the use of a yardstick we call in economics the “rate of return on investment.”

In an RF banking regime, investment banks are called upon to bring the owner of capital together with the owner of an idea or expertise so that the two may invest together and realize long-term economic growth in the community, resulting in an acceptable return on that investment leading to more job opportunities, better living standards, and prosperity in the community. The investment bankers' role is education, evaluation, promotion, and follow-up for the benefit of long-term growth, not only to realize a commission. The purpose of the RF banking system is to make capital circulate within the community. The RF discipline guided by Judeo-Christian-Islamic value system prohibits trading paper instruments that do not create wealth but rather transfer it through gaming, speculation, and manipulation. The objective should be long-term investing, not day trading as if we were in a gambling casino. Some investment bankers like to attract more money by propagating and selling ideas that resemble going to a casino, trying to make 10 or 100 times what one has committed through gambling and betting (which they misname as “investing”). Others may want to do the same by speculating on currencies in foreign exchange (Forex) markets or day trading in the stock, commodities, and futures market such as what happened during the dot-com stock market bubble, which took the Nasdaq stock market index from almost 1,800 in 1998 to 4,800 in 2000, only to crash to 2,100 in the same year and stay there, with some fluctuations, until it crashed again to almost 1,700 as a result of the burst housing bubble and the subsequent financial tsunami of 2008. Some “investors” made huge amounts of money; others — most of whom, unfortunately, happened to be the average citizens who are classified as small investors — lost their life savings and their retirement assets. Worse still, there are others who can make huge sums of money through destroying the economies of whole nations by speculating against their currencies in the Forex markets, as we witnessed throughout history. This happened to the British pound in the 1980s and to Asian currencies in the late 1990s and in the twenty-first century in some of the promising nations like Brazil and Turkey.

It is important to state clearly that the financial system has honorable, ethical and disciplined men and women who want to do the right thing, but the greed and misguided ambitions of a few have tarnished the whole industry.

In the new brand of banking presented in this book, RF banking, the RF banker answers first to his/her conscience, civility, and social responsibility, because he/she answers to a higher authority (i.e., God). The RF banker is trained to believe in a set of standards as described by the laws of the land and by the Judeo-Christian-Islamic Shari'aa law, as ordained by our Creator. It is God who created us equally, so we might live in peace with each other and care about each other. The RF banker is disciplined to make a difference in people's lives by investing in them and with them. In doing so, the RF banker evaluates his/her progress not only by how much income was made through commissions and fees but by how many households were added to the family of his/her RF bank and the extent of the improvement the RF bank has made to these families by serving them and their financial needs. The RF banker makes sure, before he/she starts the process of financing (notice that the word lending is not used here), that the money/credit needed will be used in a productive and tangible project that will benefit the community, that it will not involve speculation and/or deceptive activities, that it does not involve investing in socially irresponsible activities — like operating a casino or taking advantage of the poor in businesses such as check cashing, payday lending stores, predatory lending, and other similar activities — and that it will be used for environmentally and socially responsible investments. The RF banker should have a passion for serving people, should enjoy helping those who need assistance, and, most importantly, should have a vision for improving the lives of those around him or her in the community at large. People in the community expect that when their money is entrusted to a bank, it is treated by the bankers as a sacred trust that will be honored and closely guarded. People's money should be returned intact, as is, when it is demanded by its owners. It also cannot be disposed of in the form of a loan or credit facility to others without the consent of the owner.