Banking – from the Muslim perspective

This was a really interesting read – Inside Islam goes provides an explanation on how banking in the Islamic religion is suppose to work. The most surprising thing? No interest on loans!

According to Business Week, instead of earning interest banks and individuals profit from investments in other ways. Investments are technically considered leases, where the individual will pay back the total sum borrowed in a set amount of time with “rental payments.” Alternatively, the bank turns over the payments to a third party. The third party, Citibank for example, shares the profits with investors in return for service. By charging a “service fee” for doing its part in the transaction, Citibank can earn steady profits from providing a line of credit.

OK – so it’s kind of like interest. But not. Still, an interesting look on where religion and economics meet.