It is a banking system that provides banking services and products in line with the rules and principles of Shari’a and it is conducted under direct supervision and audit of Shari’a Supervisory Board.
What is Shari’a?
Shari’a is an umbrella term, which stands for the principles and rules related to practical aspects of life, covering cover acts of worship, financial transactions, family law and laws of inheritance, rules of war and peace, etc., whether they are mentioned explicitly in the Holy Quran and Sunnah, or derived from other Shari’a sources by Mujtahedeen, through application of the rules of Ijtihad.
Who are the members of ahli Islamic Shari’a Supervisory Board?
The members of ahli Islamic Shari’a Supervisory Board are:
Sheikh Dr. Mohammed Taher Al-Ibrahim, Chairman of SSB
Sheikh Dr. Mustaien Ali Abdulhamid, Deputy Chairman of SSB
Sheikh Dr. Abdulrauf Abdullah Hamood Al Tubi, Member of SSB
Is Islamic banking specific to Muslims?
No, Islamic banking is for all. Anybody who fulfills the bank’s requirements can avail Islamic banking services. However, Islamic bank does not enter into activities which are harmful for a society, or any businesses that are not allowed by Islamic Shari’a, such as the business of alcohol, pork,, etc.
What are the key modes of Islamic banking and finance?
Following are the most commonly used modes of Islamic banking and finance:
Mudaraba is a form of partnership where one party provides the funds whilstthe other provides management services against a pre-agreed share in the profit of the investment. However, if there is any loss, it is borne solely by the capital provider.
Musharaka is a partnership with all the parties contributing to the capital of the Musharaka, on the basis of profit and loss sharing. The profit shall be shared as per the agreement, but the loss will be borne pro rata.
Murabaha is a sale contract in which an individual/entity sells an asset at cost, plus an agreed profit. The sale price could be paid on spot or deferred.
Musawama is a general kind of sale in which price of the commodity to be traded is bargained between the seller and buyer, without any reference to the price paid or cost incurred by the former.
Ijara is a leasing contract in which the owner of an asset or its usufruct sells the usufruct of the underlying asset to the lessee for an agreed rental.
Salam is a sale in which payment is made on the spot, while the delivery of the goods is deferred.
Istisna refers to a sale in which the buyer orders a manufacturer to produce and deliver a fully described commodity from raw materials of its own. It is basically an order to manufacture.
How do Islamic banks make profit?
Islamic banks invest/utilize the funds received from account holders/customers under Islamic modes of financing, such as Ijara, Murabaha, Salam, Istisna and investment contracts such as Mudaraba, Musharaka, Wakala etc. to generate profit.
Is it permissible for an Islamic bank to impose penalty for late payment?
If Islamic banks do not impose penalties on late payment, customers may not pay in time; in turn, Islamic banks will not be able to run their business efficiently and give a good return to investors. Therefore, Islamic banks have decided to take from each client an irrevocable undertaking that in case of late payment the client shall be charged a penalty, which shall be donated to a charity supervised by the Shari’a Supervisory Board of the bank, independently from the bank. Islamic banks do not use these donations for their own benefit, but incorporate such provisions in their contracts to check potential default.
Do Islamic banks have credit cards?
Yes, Islamic banks offer interest free credit card facility, for which the client pays a monthly fee, irrespective of the way the client uses the card during the period. The fee is in lieu of real services that a credit card holder becomes entitled to. The fee neither increases nor decreases on the basis of the use, frequency of usage or non-use of the card by the customer.
Is there any difference between Interest and Usury?
No, both have the same meaning. Qur’an, Sunnah and Fiqh do not differentiate between the two. Islam terms what is known as interest or usury as Riba, and therefore prohibits it.
How is Islamic banking different from conventional banking?
Islamic banking offers Riba free banking, in line with Islamic Shari’a rules. It neither gives nor takes interest on loans . It operates as a trading company, which buys, sells and enters into different contracts of investment such as Mudaraba, Musharaka etc.
Is Islamic banking complicated? Does it involve a lot of documentation work?
No, it uses simple Shari’a based contracts like Mudaraba, Musharaka, Murabaha, Ijara and etc.
Is it possible to guarantee profit rates?
No one can guarantee or assure profit rates in Islamic banking. Islamic banks declare the profit of their investment pools periodically, and the declared rates can be referred to in order to show past performance with a clear disclaimer that the bank may or may not perform at the same level in future.
Would you be catering to customers involved in business/activities prohibited in Islam?
No, Islam does not allow business in prohibited items. This is one of the major differences between an Islamic and a conventional bank.
Which of the Islamic modes of investment does ahli Islamic use with customers who would like to invest through savings and deposit accounts?
ahli Islamic uses Mudaraba and Wakala bil istithmar for investment of its deposit accounts.
What is the underlying principle for current account?
ahli Islamic’s Current Account product is based on the principle of Qard. According to this principle, the bank guarantees safe custody of the deposited amounts and there are no profits shared with the depositor.
Who is eligible to open accounts in Islamic banks?
All persons (individuals, corporate entities, firms, societies, clubs, government organizations, statutory bodies/corporations, public and private institutions, etc.) are eligible to open account in Islamic banks, provided they fulfill the banks’ and the regulatory authorities’ requirements.
How can we ensure that all the financings are in line with the pronouncements and directives of the Shari’a Board?
All financing products are approved by the bank’s Shari’a Board. The bank has a Shari’a compliance department, which monitors the operations of the Bank and ensures the implementation of Fatwa and Shari’a Supervisory Board’s directives. If any transaction is found as Shari’a repugnant, its returns are not considered in the income of the bank. It is credited into a charity account, as per the Shari’a Board’s decisions.
What is use of amounts collected in charity account?
The amounts collected in charity account are disbursed under direct supervision of the Shari’a Supervisory Board of the Bank to the organizations which perform charitable activities.
Are Islamic banking services offered only to Muslims?
No, Islam does not prohibit from selling or buying or entering into partnership with non-Muslims, provided the underlying transactions are Shari’a compliant.
In a loss event in Mudaraba, does the dispositor bear any loss?
Yes, the Account Holder bears the loss in proportion to his/her investment.
Is insurance allowed in Islamic banking?
Takaful is a form of Islamic insurance which is based on Shari’a rules. In case of absence of a Takaful based company, Islamic banks are allowed to get insurance cover through conventional insurance to avoid exposing the investors’ deposits to high risk until the availability of Takaful services.
What is Takaful?
Takaful is the Islamic way of Insurance. Takaful means mutual protection through contribution by each member.
Will ahli Islamic offer overdraft facility?
No, overdraft facilities are not allowed in Islamic banking. Islamic banks may offer Shari’a compliant alternatives for such a facility.
What is the term used for profit in Islamic banking?
It’s called Ribh in Arabic, and is translated as profit in English.
What are Sukuk?
Sukuk are Islamic Investments certificates issued against shares in the underlying assets, whether existing or described as assets promised to be delivered in the future, or shares in the usufruct of such assets or shares in services.
How do Sukuk operate?
The owner of Sukuk becomes the owner of the underlying assets in proportion to the investment, and therefore bears the loss and is entitled to the profit proportionately.