Any experience with Islamic Banks

toomsie

I have done a google search on Islamic banks but do not know their disadvantage.

_Andy_

What information do you want?

Typhoon2000

The payments are fixed for the life of the loan. So whilst they won't go up, they won't come down either. The banks will the price of the sale to you based on what they think the average interest rate would have been over the term ( so basically a 25 yr fix wit no early redemption charge). You need to do the maths and decide if paying the premium is worth knowing there will be no change in your mortgage payments.
Available to everyone, not just Muslims obviously.

antrobus

Typhoon2000 wrote: »

The payments are fixed for the life of the loan. So whilst they won't go up, they won't come down either. The banks will the price of the sale to you based on what they think the average interest rate would have been over the term ( so basically a 25 yr fix wit no early redemption charge). You need to do the maths and decide if paying the premium is worth knowing there will be no change in your mortgage payments.
Available to everyone, not just Muslims obviously.

Well that's how Sharia complaint mortgages work. The same mechanics don't necessarily apply to all products offered by Islamic banks.

toomsie wrote: »

I have done a google search on Islamic banks but do not know their disadvantage.

I'm not aware of any specific disadvantages.

Basically Islamic banking works on the basis that no interest is paid or received. However, in practice, all that means is that the interest to be paid or received is called something else.

debtcutter

antrobus wrote: »

Basically Islamic banking works on the basis that no interest is paid or received. However, in practice, all that means is that the interest to be paid or received is called something else.

Exactly right.

To all intents and purposes, it's just interest, but Islam prevents money being lent at interest.

With Islamic mortgages, the bank "buys" the property from the seller, then sells it to you, making a profit that coincidentally happens to be about the same level of profit a normal mortgage provider would make from a mortgage, then the Islamic bank allows you to repay them in installments, just like a normal mortgage.

So basically, it's nothing like interest, honest

toomsie

I understand why the payment of interest is evil. For example if everyone had an equal share of gold and banks offered loans at 50%( 2 gold peaces to be payed back for the loan of 1 peace of gold) then over time the banks would end up owning all the gold.

The only way Islamic banks appear to improve on current system is more transparency and the fact that there is no central-bank controling interest rates & inflation thus scrowing with market indicators. And each bank has an incentive to cut its fees(for loans) and increase its payout( for savings accout) to stay competitive.

I guess a big plus is that Islamic banks is that cental-banks are unlikey to be get a foothold. I assume if a central bank did try it would have to force Islamic banks to become incompatible with Sharia law.

[Deleted User]

They're much like any other bank, unless you don't repay the loan, in which case it really can cost you an arm and a leg.

antrobus

toomsie wrote: »

I understand why the payment of interest is evil. For example if everyone had an equal share of gold and banks offered loans at 50%( 2 gold peaces to be payed back for the loan of 1 peace of gold) then over time the banks would end up owning all the gold.

History proves otherwise.

toomsie wrote: »

....The only way Islamic banks appear to improve on current system is more transparency and the fact that there is no central-bank controling interest rates & inflation thus scrowing with market indicators. ....

That's odd. Both Saudi Arabia and Iran (generally regarded as Islamic nations) have central banks. And in any case, any Islamic banks operating UK are operating in the same enviroment as non-Islamic banks, and are subject to the exact same controls.

debtcutter

toomsie wrote: »

I understand why the payment of interest is evil. For example if everyone had an equal share of gold and banks offered loans at 50%( 2 gold peaces to be payed back for the loan of 1 peace of gold) then over time the banks would end up owning all the gold.

That would be 100% interest.

toomsie wrote: »

The only way Islamic banks appear to improve on current system is more transparency and the fact that there is no central-bank controling interest rates & inflation thus scrowing with market indicators.

1) Do you genuinely believe that charging interest, but calling it something else so that people don't feel like they're angering their god is more transparent?

2) Name 3 countries that don't have a central bank......

debtcutter

antrobus wrote: »

History proves otherwise.



That's the one bit I don't agree with.

History doesn't prove otherwise. The greedy gold vault owners in Europe took people's gold, they then said "we'll keep your gold, but will give you this paper money stuff for you to pay for goods, rather than lugging gold around".

They then quickly realised that nobody knew how much gold was stored in the vaults, so could write paper receipts with a total value much higher than the gold stored in the vault.

Hey presto, fractional reserve banking (multiple claims on the same money) is born (although many on this site disagree with the origins being quite as devious as this).

antrobus

debtcutter wrote: »

antrobus wrote: »

History proves otherwise.

That's the one bit I don't agree with.

History doesn't prove otherwise.

Yes, it does. We've had banking in this country since time immemorial and the banks still don't own everything.

debtcutter wrote: »

....2) Name 3 countries that don't have a central bank......

According to Wikipedia, that would be Andorra, Monaco and the Vatican City.

I was surprised, I thought it would be more, but even San Marino has a central bank. I was even more surprised to discover that North Dakota has a central bank.