In operations and principles, an Islamic bank (Non-Interest Bank) or NIB is completely different from Interest Banking System.
And to answer the question, Non-Interest Banking generally doesn’t provide cash loans to its customers whether Muslim or Christian or regardless of their religious beliefs, yet Islamic banking is beneficial to small businesses in many ways.
Note: Islamic banking, Sharia banking, and non-interest banking are used interchangeably.
What is an Islamic Banking System?
Islamic banking system or Non-Interest Banking System is a system of financial services that complies with Islamic law or Sharia law.
As you know, loans and interest (Riba) are like conjoined twins and they are peculiar to the conventional banking system. interest negate Shariah Law. Shariah Law guides the financial operations of Non-Interest Banking.
Instead of loans, there are other ways Non-Interest Banking provides financing facilities e.g consultancy, mortgages, rental etc. Jaiz is the pioneer of Islamic banking in Nigeria
How Non-Interest Bank Operate
There are some complex laws involved in Sharia banking, Advisory Committee of Experts (ACE) helps to explain the complexity, but the basic points to know about the operation of NIB are:
1) Islamic banks will not pay interest on any savings.
2) They will not charge interest on financial facilities or borrowed money.
3) Islamic banks won’t support gambling (Maysir) investment or other forms of investment that are against Islamic teachings.
4) They don’t and will not support any financial product that offers a lot of uncertainty (Gharar)
5) They share profits with their customers
6) They share risks with their customers.
7) The principle of Non-Interest Banking is fair and easy to understand.
Examples of Islamic Banks
There are over 500 Sharia-compliant banks around the world. Although statista report in 2019 says there are 428 Islamic banks around the world.
It also reports that the total assets of global Islamic banking amounted to about $1.99 trillion USD, amounting to about six per cent of the total global banking assets.
Below are samples of Non-Interest banks around the world:
United Arab Emirates (UAE):
- Dubai Islamic Bank
- Emirates Islamic Bank
- Noor Bank
- Emirates Nbd
- Mashreq Bank (Mashreq Al Islami)
- Islamic Co-Operative Housing Corporation Ltd
- UM Group
- Qurtuba Housing Coop & Al-Ittihad Investments Inc
- Al Rajhi Bank Malaysia
- Alliance Bank Malaysia Berhad
- Bank Islam Malaysia Berhad
- Hong Leong Islamic Bank Berhad
Sharia-compliant financial institutions in the U.S. include:
- The Bank of Whittier
- Amana Mutual Funds Trust
- Manzil USA
- American Finance House, LARIBA Bank
- MSI Financial Services Corporation
- Dubai Islamic Bank
- Standard Chartered Islamic banking
- JP Morgan
I think it’s even better to modify the title of this article as:
Can Christians bank with Islamic Banking System?
Non-interest banking isn’t exclusively designed for Muslims. Christians can use it, they can enjoy the benefits of the Non-interest banking system.
Services in the Sharia banks are not conducted in Arabic, they use the language you understand. Besides, not all Muslims speak Arabic as a language.
So, the Islamic banking system is not only for Muslims. Anyone can use Islamic banks irrespective of race and beliefs.
Sharia banking is based on a fair banking system, and ethical values, and upholds the Sharia financial system.
Their principles are designed to improve the socio-economic activities of their customers regardless of religion.
In fact, I know many Christians who are more comfortable with a Sharia-compliant bank and they have accounts with them.
How Islamic bank make profits
Now we know that Islamic banks don’t engage in forbidden (haram) products and services, which could even be ‘enticing’ most times, you may want to ask:
How do Islamic banks make profit?
Will they be able to sustain their financial obligations without interests and other highly-profitable but forbidden products?
Against all odds, Non-interest Banks make profits through Sharia-compliant businesses and services they provide to their customers.
Some of the ways they make profit include:
- Sales (Murabaha),
- Project/Construction finance (Istisna),
- Agric finance (Salam)
- Leasing arrangement
- Sharing risks and profit with customers through a partnership based on a pre-agreed ratio.
- Islamic banks also make profit through the provision of fee-based services such as Wakala (Agency), Kafalah (Guarantee) and other services that are not interest-based.
Non-Interest bank or Sharia bank operates on the principle of fairness and comply with Sharia principles.
The fact that goods are prohibited doesn’t make it illegitimate. For instance, alcohol is a legitimate business whereas it is prohibited by Sharia law.
Christians can bank with an Islamic bank, provided they are ready to abide by the Sharia principles that guide the operation of NIB financial services.