Why non-Muslims are converting to sharia finance • Hacker News Board

Re: Why non-Muslims are converting to sharia finance

#121

Post by ru999gol » Mon, Oct 22, 2018, 3:32 PM UTC

gaff33 wrote: post #101

ru999gol wrote: post #75

Earlier quoted context omitted.

It seems if you save money at the bank they will actually loose money for you since their interest rate is lower than inflation. The financial market is such a clusterfuck lmao

I'm not going to claim that finance isn't a clusterfuck - but paying people to store things securely isn't exactly strange. If anything the amazing thing was that people would pay us to look after our money in the first place!

But I already pay them extra for that and they do work and profit with my money. You think your bank is just doing nothing with your money? I think its not too much to ask to want to at least get interest matching inflation. But go defend the noble banks why not.

Re: Why non-Muslims are converting to sharia finance

#122

Post by ElBarto » Mon, Oct 22, 2018, 3:37 PM UTC

BeetleB wrote: post #105

ElBarto wrote: post #55

Earlier quoted context omitted.

That's fine if you're willing to ignore the world of the middle East. The news recently should make clear how more ethical than the tobacco industry it is... not.

>That's fine if you're willing to ignore the world of the middle East. Who said anything about Shariah finance being tied to the Middle East?

That's were the strings of those banks are pulled from...

Re: Why non-Muslims are converting to sharia finance

#123

Post by dang » Mon, Oct 22, 2018, 3:43 PM UTC

nextweek2 wrote: post #50

The title and article are using reglion as a context when it's not. As a consumer I am not converting to Sharia finance, I have just found a product which meets my requirements. The index fund I am invested in turns out to be mainly high tech stocks with a low fee, just because it has 'Islamic' in the fund name doesn't mean I'm a convert to the religious philosophy.

I think it's the Economist being cheeky with the title in their usual way. A bit baity, but maybe not so much that we need to change it.

Re: Why non-Muslims are converting to sharia finance

#124

Post by hbhakhra » Mon, Oct 22, 2018, 3:45 PM UTC

nextweek2 wrote: post #50

The title and article are using reglion as a context when it's not. As a consumer I am not converting to Sharia finance, I have just found a product which meets my requirements. The index fund I am invested in turns out to be mainly high tech stocks with a low fee, just because it has 'Islamic' in the fund name doesn't mean I'm a convert to the religious philosophy.

Out of curiosity, which fund would that be?

Re: Why non-Muslims are converting to sharia finance

#125

Post by comesee » Mon, Oct 22, 2018, 3:46 PM UTC

tareqak wrote: post #47

coldtea wrote: post #35

Earlier quoted context omitted.

Then a real good paying PR piece -- the kind that's passed as an actual article.

Could you please identify the PR for me? I'm genuinely intrigued: all I see is an observation that different kind of bank has an audience outside of its intended audience, an explanation of how it operates differently, and criticism that it is not as different as it makes itself out to be.

By PR he means advertising. This article functions as advertising for Sharia banks.

Re: Why non-Muslims are converting to sharia finance

#126

Post by tareqak » Mon, Oct 22, 2018, 3:51 PM UTC

Mengkudulangsat wrote: post #66

I had the opportunity to translate technical documents for both conventional and sharia financial products a few years ago, and I find the market fascination of them mind-boggling. These products seemed to incorporate convoluted jargon and concepts which dramatically increased complexity but at the same time, produced no extra utility for end-users. On top of that, the addition of ongoing shariah-compliance introduce…

I agree that your experience is exactly what sounds like: taking a conventional financial instrument, replacing all mention of the word “interest” with something way more complicated, and adding rules that seem difficult to always stay on the right side of. That happens to be exactly what Tarek El Diwany (mentioned in the second last paragraph of article) is saying.

Shariah banks have to operate in a world that has completely accepted conventional banking. As a result, it is in a constant state of playing catch up in terms of fitting in (e.g. having to implement a software interface in which you reject some central tenets of the interface).

I don’t know the answer one way or another. What I do know is that conventional banking remains imperfect in spite of it being totally dominant: the boom-and-bust economic cycles have grown more catastrophic, and we are still grappling with accurately adding phenomena like health and pollution into our financial models.

I applaud you for trying to understand how conventional and sharia financial products fit together. I don’t find your reaction offensive: it just means we aren’t done trying find a good solution that makes both technical and moral sense.

There’s a really long Wikipedia article here about profit-loss sharing, which central concept of how sharia banking is meant to work: https://en.wikipedia.org/wiki/Profit_and_loss_sharing

N.B. I apologize for any typos since I typed/tapped this out on my phone.

Re: Why non-Muslims are converting to sharia finance

#127

Post by pvaldes » Mon, Oct 22, 2018, 3:53 PM UTC

hevi_jos wrote: post #59

In Spain the Catholic Church created a series of banks for lending to poor people, and investing profit in social causes. I think the concept came from Italy. Those banks were called "Cajas de ahorros". Most people had their money there instead of private Banks. The concept worked very well for something like 200 years. Until politicians changed the law to control the Cajas themselves. After politicians took control,…

> totally bankrupt all cajas in Spain and now they are owned by

Some cajas, not all.

The broken cajas typically 'bribed/rewarded' policitians offering them vacancies in their boards of directors.

Re: Why non-Muslims are converting to sharia finance

#128

Post by tareqak » Mon, Oct 22, 2018, 3:53 PM UTC

comesee wrote: post #125

tareqak wrote: post #47

Earlier quoted context omitted.

Could you please identify the PR for me? I'm genuinely intrigued: all I see is an observation that different kind of bank has an audience outside of its intended audience, an explanation of how it operates differently, and criticism that it is not as different as it makes itself out to be.

By PR he means advertising. This article functions as advertising for Sharia banks.

Then almost every article in TechCrunch is... never mind.

Re: Why non-Muslims are converting to sharia finance

#129

Post by mnrasul » Mon, Oct 22, 2018, 4:05 PM UTC

candiodari wrote: post #83

Mengkudulangsat wrote: post #66

I had the opportunity to translate technical documents for both conventional and sharia financial products a few years ago, and I find the market fascination of them mind-boggling. These products seemed to incorporate convoluted jargon and concepts which dramatically increased complexity but at the same time, produced no extra utility for end-users. On top of that, the addition of ongoing shariah-compliance introduce…

I must say I once read a prospectus for a sharia financed product. No "interest", only "percentual administrative fees". Wait, what ? Other than that, they're essentially "pulling an uber". They're significantly riskier investment schemes that most institutions have had really bad experiences with a few decades ago. They're ignoring regulations that exist for good reason, and regulators seem to let them for some reas…

So, I've read some literature, and my understanding is that there are ways to structure it, just that they can be subtle and slightly difficult to understand.

Suppose you want to buy a house. The idea is that, you'll agree on a price of the house, which is greater than current market value. Suppose listing price is 100K. You agree on 150K with the lender. Each payment is expected to pay as part of 150K.

This however creates two problem. Lender's profitability depends on accurately determining the future price. Either lender or applicant can suffer from imprecise price.

An alternative I've seen is, the notion of rent. Suppose, at closing the lender buys the house for you, with the intention that you'll reside there and pay market rent.

Suppose the price of house is 100K, and rent is 1000/month. Now suppose, there's no down payment, you'll have to pay above 1000/month to start building equity.

After first payment of 1100, you have equity of 100$, while the lender has 99.9K. So, when the 2nd month payment goes, you can get to keep 0.1% of rent as equity OR use that to build more. Over time, you'll eventually pay it off. This part likens it to interest, except because rents are market based, they don't fly with borrowers.

So lenders have come up with "Administrative" fees, which I equally think are BS. Hence traditional mortgage still are more accessible.

I would love it if there was a rational product out there.

Re: Why non-Muslims are converting to sharia finance

#130

Post by k__ » Mon, Oct 22, 2018, 4:09 PM UTC

I once read that "sharia finance" is just a buzzword and those banks are doing business as every other bank, just with different naming of their processes/products.