While we were visiting our fellow Northwood University at INTI college we had a session on Islamic Banking held by Faizal Abdul Rahim. He started out by telling us the history of Standard Chartered bank which started in 1875 and is the oldest bank in Malaysia. It was the first bank to offer Islamic products which they started doing in 1993. Islamic Banking refers to a system of banking which is consistent with Islamic law and guided by Islamic economies. Basically what Islamic banking is is banking with "no interest". I say that in quotations because one might view the system as interest but in the eyes of Islamic rules and regulations it is not interest. Faizal explained to us the differences between Hala (Permissible) and Haram (Prohibited). Prohibited are things like gambling, interest, drugs, and so on.
Many questions were asked during our session. One he answered before we could ask it was if you have no interest how to do make money? They don't have interest but once you put your money into the bank your money is then invested for you into another company that would for example be taking out a no interest loan. Both sides would agree on a percentage rate of return with the bank and then the money coming back to the "saver" would be a percentage of a percentage of the rate of return from the "loaner." It is a very interesting process that makes you think in a business mind while also dealing with the aspect of a bank. Many questions came about when Fazial told us that under Islamic law you may no borrow money with no interest. One might ask well then how do you facilitate a loan and still being beneficial to the banker? The process that he explained was lengthily but under Islamic law was permitted. The banker will buy a commodity for the "loaner," the example given was steel. The bank buys the steel at $10,000 and sells it to the "loaner" for $15,000 but the "loaner" needs to pay for the steel somehow so the bank sells the steel on behalf of the "loaner" and then the "loaner" gets the money and the bank makes a profit off of the sale of the steel to the loaner and the second time to the buyer of the "loaner's" steel. All in all the process was very confusing to a non Islamic person that doesn't have to follow rules and guidelines when it comes to banking and loans but it is a process that helps many Islamic people follow what they believe in while still being able to use a bank to keep there money safe.
Top: Northwood Students at INTI college, Malaysia
Right: Faizal Abdul Rahim (center)