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Home arrow Business & Finance arrow The art of RF (riba-free) Islamic banking and finance


The Lifestyle of the Judeo-Chnistian-lslamic Value System

As has been stressed throughout this book, the Judeo-Christian-Islamic value system prohibits us from participating in the culture of renting money. Perhaps one of the most important prohibitions in the Jewish Bible (Exodus: Chapter 22, verses 24-26), the Christian Bible (Exodus 22:25, Leviticus 25:35-37, Deuteronomy 23:19-20, Nehemiah 5:1-13, Psalm 15, Proverbs 28:8, Ezekiel 18:5-18, Habakkuk 2:6-7, Luke 6:27-36) and the Qur'aan (Chapter IIAl-Baqarah 275-278, Chapter III — Alee Imraan — The Family of Mary & Jesus (the family of Imraan): 3:130, Chapter IVAn-Nissa'aa (Women): 4:161, Chapter XXXAr-Rum (The Romans): 30:39) is the prohibition of ribit (Old Testament) or riba (the Qur'aan).

As explained in Chapter 2, we know from the original Jewish teachings that a person of the Jewish faith who participates in ribit cannot stand as a witness in a Jewish court; the Old Catholic teachings (before the fifteenth century c.e.) held that a person who deals in ribit is denied a Catholic burial. In the Qur'aan, charging of ribit/riba is one of the most severe offenses against God.

As discussed in great detail throughout the book, ribit/riba, according to Judaic, Christian, and Muslim teachings (which this book has pioneered calling Judeo-Christian-Islamic values) can be defined as the act of renting money at a price called interest rate. In the old days, the word usury was derived from the act of paying a price (interest) for the use of money. We also know that today's money is a thing, a man-made currency. It is fungible, just as an apple is. One cannot rent an apple from another, and the same applies to money. The minute money is handed over to another person, it becomes that person's responsibility to invest it prudently, and it is the responsibility of those who give it in trust (the bankers and investors) to users (the borrowers) to handle it prudently.

That is why today's culture, which emphasizes spending as much as you can today by renting money with interest from banks, by using credit cards, and by using the family's home as a credit card (home equity line of credit and home equity loans), is frowned upon and prohibited by all faiths, especially those in the Judeo-Christian-Islamic value system. Money is a measuring device that quantifies the success or failure of an investment. It is not for hire or rent to the highest bidder (at the highest interest rate), and it can be used for food to survive. If we had evaluated the purchase of each item, based on its utility as measured by its actual market rent (rent of a car, a house, or a business, according to the Marking-to-Market and Commodity Indexation Disciplines (discussed in the book), we would have been saved from the wrath of speculation and from the deep holes of debt many of our community members and our beloved country and countries of the world are suffering from. That is why Jesus (pp) took it upon himself to drive the money changers out of the temple.

It is believed that one of the important elements in solving the unfortunate financial meltdown — which started in 2008, and its ripple effects are still felt in all corners of the world in 2014 — is to simply reverse the trend of mergers and acquisitions that caused the financial institution to grow so large that it became difficult to manage and regulate. It is sincerely believed that it is the responsibility of the government regulators, through their periodic examinations, to decide whether an institution has outgrown its ability to manage risk. Time and again we were taught — by the hard school of loss of people's money and assets — that the investment banking culture is completely different from that of the commercial banker. Based on my own experience while working with Smith Barney and Citigroup, it is evident that investment bankers and commercial bankers have two different temperaments, risk tolerances, and professional purposes. It was proven that the two cultures cannot be merged or mixed. Bank of America tried it with Charles Schwab and failed in the 1980s; Citibank and Smith Barney tried and failed to succeed at the dawn of the twenty-first century; and now Bank of America, after merging with Merrill Lynch after the 2008 meltdown, is once again finding out that what we learned in the late 1970s and early 1980s still holds true. Perhaps we should respect the experience that led to the Glass- Steagall Act, which installed a thick wall between the two activities after the Great Depression.

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