Comments on: Bailed-out AIG offers Islamic insurance to U.S. http://smoothstoneblog.com/2008/12/bailed-out-aig-offers-islamic-insurance-to-us.htm A content-rich information fact and opinion blog that advocates, educates, professes, affirms, defends and furnishes facts about the legitimate and sovereign nation of Israel Fri, 23 Jul 2010 00:27:20 +0000 hourly 1 http://wordpress.org/?v=3.0 By: smoothstone http://smoothstoneblog.com/2008/12/bailed-out-aig-offers-islamic-insurance-to-us.htm/comment-page-1#comment-1880 smoothstone Sat, 06 Dec 2008 13:42:47 +0000 http://smoothstoneblog.com/?p=2888#comment-1880 Islamic banking refers to a system of banking or banking activity that is consistent with the principles of Islamic law (Sharia) and its practical application through the development of Islamic economics. Sharia prohibits the payment of fees for the renting of money (Riba) for specific terms, as well as investing in businesses that provide goods or services considered contrary to its principles (Haraam). While these principles were used as the basis for a flourishing economy in earlier times, it is only in the late 20th century that a number of Islamic banks were formed to apply these principles to private or semi-private commercial institutions within the Muslim community. For example, in an Islamic mortgage transaction, instead of loaning the buyer money to purchase the item, a bank might buy the item itself from the seller, and re-sell it to the buyer at a profit, while allowing the buyer to pay the bank in installments. However, the fact that it is profit cannot be made explicit and therefore there are no additional penalties for late payment. In order to protect itself against default, the bank asks for strict collateral. The goods or land is registered to the name of the buyer from the start of the transaction. This arrangement is called Murabaha. Another approach is EIjara wa EIqtina, which is similar to real-estate leasing. Islamic banks handle loans for vehicles in a similar way (selling the vehicle at a higher-than-market price to the debtor and then retaining ownership of the vehicle until the loan is paid). Islamic banking refers to a system of banking or banking activity that is consistent with the principles of Islamic law (Sharia) and its practical application through the development of Islamic economics. Sharia prohibits the payment of fees for the renting of money (Riba) for specific terms, as well as investing in businesses that provide goods or services considered contrary to its principles (Haraam). While these principles were used as the basis for a flourishing economy in earlier times, it is only in the late 20th century that a number of Islamic banks were formed to apply these principles to private or semi-private commercial institutions within the Muslim community.

For example, in an Islamic mortgage transaction, instead of loaning the buyer money to purchase the item, a bank might buy the item itself from the seller, and re-sell it to the buyer at a profit, while allowing the buyer to pay the bank in installments. However, the fact that it is profit cannot be made explicit and therefore there are no additional penalties for late payment. In order to protect itself against default, the bank asks for strict collateral. The goods or land is registered to the name of the buyer from the start of the transaction. This arrangement is called Murabaha. Another approach is EIjara wa EIqtina, which is similar to real-estate leasing. Islamic banks handle loans for vehicles in a similar way (selling the vehicle at a higher-than-market price to the debtor and then retaining ownership of the vehicle until the loan is paid).

]]> By: Jeremy Jacobs http://smoothstoneblog.com/2008/12/bailed-out-aig-offers-islamic-insurance-to-us.htm/comment-page-1#comment-1873 Jeremy Jacobs Sat, 06 Dec 2008 11:24:18 +0000 http://smoothstoneblog.com/?p=2888#comment-1873 How does this actually work. What are the differences between standard insurance and Sharia compliant? How does this actually work. What are the differences between standard insurance and Sharia compliant?

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