Islamic Circle of Australia and New Zealand (iCAN), Melbourne organised an online lecture on “Clearing Myth & Confusion on Islamic Home Loans/Finance” on November 28. Dr. Waquar Anwar, Cost Accountant by profession and Secretary of Board of Islamic Publications (BIP) delivered the lecture on Zoom platform.
Dr. Anwar is a critic of Islamic Finance, which he defined as ‘a misnomer’. He raised a question: “Is Islamic Finance better than Conventional Finance?” and replied in the negative. He said Islamic Finance is neither good nor bad; it falls into the ‘not-bad’ category. He further elaborated that 90 per cent of Islamic Finance being practised in the various parts of the world is either murabaha or ijara.
Murabaha is cost plus. If the deal is well agreed upon, one can charge commission. If one borrows something from another person, there are two conditions. One, if a person consumes the borrowed thing in totality, he has to return the same in equal amount; suppose one borrows two eggs from the neighbour, he has to return two eggs to the neighbour, neither less nor more; if more, it will be interest. Two, if one consumes something in part, he has to pay rent; suppose one hires a car with its driver, he has to pay rent while he returns the car and the driver intact. There is no element of gharar.
Citing the Prophet’s ﷺ hadith, la gharar wa la zarar, the learned speaker said that a business deal must be transparent and all the terms of the business must be well specified before the parties concerned sign the agreement. When income or profit is not specified and one of the parties is kept in the dark, it is gharar. And if one harms the interest of the other party, it is zarar.
The speaker opined that there is no element of gharar in yearly increase of rent if it is specified in the agreement, say 5 per cent. But, if the amount of rent increase is not specified in the agreement, it carries an element of gharar. However, he clarified that gharar does not render a deal haram but it definitely weakens it.
Referring to Mufti Muhammad Taqi Usmani, the speaker said that a debt that fetches extra money is a deal based on riba (interest). It is prevalent in conventional banking system while it is haram in the eyes of Islam.
In conventional banking, a bank purchases a car on your behalf and gives you, and you have to pay back the principal money incurred on the purchase of the car as well as interest. While in Islamic banking, you have to pay back the principal money only. This is the difference between Islamic Finance and Conventional Finance.
However, something depends on mutual agreement, like repair and maintenance, small or big, of a house. You have to adjust it as per the agreed upon terms.