Saturday, May 19, 2012

Of Money Lending Risks vs Business Risks

Assalamu 'Alaikum

Commenting on the article by Salman Sheikh below Islamic banks should also learn to differentiate money lending from business risks. Islamic bank leases assets and sells assets; they should manage business risks not money lending risks which is the realm of conventional banking.

Take a cold hard look at term sheets and legal documents, an intelligent Islamic banker will be able to identify the money lending risk management clauses in there which should be remove if one does not want to be labelled a money lender 

The operative legal maxim in Muamalat is Alghunm bi Alghurm. One is not entitled to reward unless one is willing to expose oneself to risk. The Muamalat practitioner who understands this Shariah injunction seeks risk to justify his rewards 

Risk is only ugly to riba bankers; Islamic bankers who wants to be Islamic Muamalat practitioners are required to seek risks as a matter of Shariah injunction.

Best regards and Salam

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