If you don't charge any interest on loans, then the size of the loan vs the amount the loanee actually receives need to diverge, if you don't want the bank to go bankrupt. The 'arrangement fee', if you call it that, must cover the costs of the Islamic bank.
How do Islamic banks handle the effects of inflation? They have to have a way of hedging themselves otherwise they will disappear over time as an ineffective place for depositers to lodge their money.
I'm no defender of the more pirate-like Western banks, but there really is no panacea of how to lend money interest-free. Interest-free loans only exist in inflation-free worlds or as charity. There have to be costs incorporated to cover the % of loans that go bad and to cover the costs of administration.
Good points. I don't know. I'm not into banking, Islamic or otherwise. I just know that usury, i.e. interest, is haram/forbidden and I admire Islam for this basic human decency. Islam does require tithing which is usually between 8-10%. Since religions in the Middle East are still living, breathing entities--faith isn't something you put on for the sabbath as it is i the West--people happily tithe as well as help out the less fortunate as a matter of worship of God. Not saying many Western Christians and Jews don't do this as well, but most Westerners don't and religion in the West is nothing like religion in the M.E. is. It's not a living, breathing part of being alive, in all things. It's separate. Perhaps that's how they are compensated. This is an interesting line of inquiry, however. It would be good to find out from an Islamic bank or Islamic economist how this works and incorporate it into our system in community-owned banks, don't you think? The level of personal debt in this country is outrageous. And the details behind our NATIONAL debt are outrageously immoral and unethical. Plenty of people have been following this more closely than me. I've never bought into "The American Dream". The Federal Reserve is actually a consortium of private bankers--not all American--and they don't actually "lend" money to the government. They just add the figures on a computer database and immediately charge us, the taxpayers, interest. In the process, our dollars lose value. That is what inflation is: The devaluation of the dollar. Our GDP is largely comprised of debt. Our actual productivity is quite low.
What has caused inflation in Middle Eastern countries, and I know this for a fact, is US sanctions on their economies. Sanctions might work in the short-term but they fail in the long-term because the sanctioned countries become more creative, more efficient, and more self-sufficient. The US is sanctioning 60% of the world's economies. That's mafia-type behavior. And I don't think the Dems or the Republicans control this country: The hidden mafia behind the scenes does.
If you don't charge any interest on loans, then the size of the loan vs the amount the loanee actually receives need to diverge, if you don't want the bank to go bankrupt. The 'arrangement fee', if you call it that, must cover the costs of the Islamic bank.
How do Islamic banks handle the effects of inflation? They have to have a way of hedging themselves otherwise they will disappear over time as an ineffective place for depositers to lodge their money.
I'm no defender of the more pirate-like Western banks, but there really is no panacea of how to lend money interest-free. Interest-free loans only exist in inflation-free worlds or as charity. There have to be costs incorporated to cover the % of loans that go bad and to cover the costs of administration.
Good points. I don't know. I'm not into banking, Islamic or otherwise. I just know that usury, i.e. interest, is haram/forbidden and I admire Islam for this basic human decency. Islam does require tithing which is usually between 8-10%. Since religions in the Middle East are still living, breathing entities--faith isn't something you put on for the sabbath as it is i the West--people happily tithe as well as help out the less fortunate as a matter of worship of God. Not saying many Western Christians and Jews don't do this as well, but most Westerners don't and religion in the West is nothing like religion in the M.E. is. It's not a living, breathing part of being alive, in all things. It's separate. Perhaps that's how they are compensated. This is an interesting line of inquiry, however. It would be good to find out from an Islamic bank or Islamic economist how this works and incorporate it into our system in community-owned banks, don't you think? The level of personal debt in this country is outrageous. And the details behind our NATIONAL debt are outrageously immoral and unethical. Plenty of people have been following this more closely than me. I've never bought into "The American Dream". The Federal Reserve is actually a consortium of private bankers--not all American--and they don't actually "lend" money to the government. They just add the figures on a computer database and immediately charge us, the taxpayers, interest. In the process, our dollars lose value. That is what inflation is: The devaluation of the dollar. Our GDP is largely comprised of debt. Our actual productivity is quite low.
What has caused inflation in Middle Eastern countries, and I know this for a fact, is US sanctions on their economies. Sanctions might work in the short-term but they fail in the long-term because the sanctioned countries become more creative, more efficient, and more self-sufficient. The US is sanctioning 60% of the world's economies. That's mafia-type behavior. And I don't think the Dems or the Republicans control this country: The hidden mafia behind the scenes does.