A respected Muslim scholar Shaikh Sulaiman Ghani (Imam of Tooting Islamic Centre) delivered a talk at the Abu-Bakr mosque in Southall on the topic of Riba (usury - interest).

Shaikh Sulaiman Ghani, who also hosts a program on Islamic Channel, delivered the talk after the Asr prayers on Sunday at around 7.30pm.

This was followed by a presentation on the same topic by 1st Ethical, a dynamic firm of Trust based Tax Specialists, who started by explaining how the banking system works and who the main beneficiaries are.

The summary below gives a brief overview of the talk and a novices understanding of what the Islamic banking model is, for the benefit of Muslims and non-Muslims.

The banking system work in such a way that the rich getter richer.

The world most powerful and rich (G8 countries) lend to the poorer countries who are unable to repay their debt. Just repaying the interest denies their citizens basic services.

Money is in the hands of a few and also lent to a small rich minority.

The lender (investor and banks) takes very little risk and receive a modest return. The money is lent to those who already have money to invest.

The difference with Islamic finance is that the investor and borrower both share the risk and profits. That may sounds just like normal banking.

In normal banking, banks are too eager to lend you money. You have to repay it back with interest and if you fail to do so, you stand to lose everything and the bank grabs everything.

Islamic banking should not lend money if the basis for borrowing is unsound. You do not have to repay it back with interest. You pay an agreed percentage of the profit. If there is a loss, the bank shares the loss.

Islamic mortgages work on the principle of shared ownership. You pay a market rent for the part you don’t own. On selling, any gains on the value of the property should not go to the bank, as this will make it a costly alternative.

Unlike other bad deeds, earning or giving interest is an extremely serious offence, such that it is the only one that carries a specific warning about the consequences in the Quran.

Yet some people, lacking knowledge or alternative options treat is as a very minor ill deed.

Borrowing money for purposes other than business can be very difficult. Borrowing or lending money should be like for like and not include interest ie gold for gold. To lend money (without interest) to some one in need is considered a good deed. You won’t find any banks doing that.

The general concensus was that Islamic products are not fully compliant yet but they are getting a lot better than before.

The topic of Islamic Finance is not simple or straight forward, otherwise a consensus would have been reached a long time ago. Annual inflation is an ingredient that can muddle the waters. Each and every situation should be looked at separately.