Questions from Readers about Shari’a-based Loans and Investments

January 5, 2014

Answered by Mohammed Waseem

Shakeel wrote:

Assalaamo Alaikum,

Is there any Islamic Bank in India that offers financial support to Muslims? I have a home and car loan wherein I pay interest. I would like to convert these into long term loans with a Islamic bank to prevent myself and my family from paying any interest.

Your response shall be highly appreciated.

Jazaak Allahi Kahirun,

Shakeel

Islamic InvestmentsAnswer:

Wa Alaikum as Salam Shakeel,

Unfortunately, it is presently impossible to transfer interest based loans from commercial banks in India to an interest-free financial institution, because such an institution does not exist in India. Islamic Banking was opposed by the RBI until recently when it allowed a Non Banking Financial Company to deal with interest-free financing. This institution has not been established yet, you could read more about it in my previous post: First Islamic Bank in India. You could approach them after it has been started, in order to explore possibilities. Alternatively, you could transfer your loan balance to a bank or NBFC which charges lowest interest so that you can do away with it as soon as possible. Perhaps you can take help from here.

Kedir Ababulugo wrote:

Asellamu Alleykum, I live in Ethiopia, investing in coffee supply sector; & need to get Riba-free loan to maximize the business. Hence, I really need you to suggest me the overall basic information that enable me to get the loan – the major Islamic banks & on which bank should I better apply, requirements & criteria’s I should met; & others. Thank you.

Regards

Kedir Ababulugo

Answer:

Wa Alaikum as Salam Kedir,

There is no Islamic Bank in Ethiopia because the National Bank of Ethiopia has issued a directive denying the launch of Islamic Banking. However, there are a few privet banks in Ethiopia which provide riba-free loans to Muslims, through the Islamic Banking window. Oromia International Bank does not seem to have started the service because their website says that the interest-free banking window is coming soon.

I found that Commercial Bank of Ethiopia (CBE) also provides interest-free loans. The following branches of CBE in Addis Ababa have interest-free banking window:

  • Abakoran Branch
  • Addis Ketema Branch
  • Alem Bank Branch
  • Anwar Mesgid Branch
  • Atana Tera Branch
  • Ayertena Branch
  • Kolfe Branch
  • Mehal Gebeya Branch
  • Paulos Branch
  • Theodros   Branch

In other major cities, the following branches of CBE have interest-free banking window:

  • Jijiga Branch
  • Harer Branch
  • Dire Dawa Branch
  • Hawasa Branch
  • Wolayita Branch
  • Shashemene Branch
  • Jimma Branch
  • Nekemte Branch
  • Bahirdar Branch
  • Jantekel Branch
  • Dessie Branch
  • Nazret Main Branch
  • Mekelle Branch

For more details and instructions, you may walk in to one of these branches, give your investment details, pay back facilities required, etc. and ask about further requirements.

Fareeha wrote:

Salam,

We want Islamic banking to finance a home in New Zealand where I am currently employed as a doctor. Please advise regarding any Islamic banking for home loan in New Zealand.

Regards

Fareeha

Answer:

Wa Alaikum as Salam Fareeha,

Many leading multinational companies including Deloitte and KPMG have been discussing about Islamic Banking products. According to a news report from 2008, a non-Banking lender Argosy Finance launched New Zealand’s first interest-free home loan, but they stopped offering loans in the next year, due to some problems with their insurer.

The Federation of Islamic Associations of New Zealand (FIANZ) is trying its best to make Islamic finance available to Muslims in the country. It is working with Deloitte in conducting a research to determine whether sufficient interest exists in New Zealand, for Shari’a-based loans and mortgages. Their website says that they are still conducing the research.

Syed Mostak Ahmed wrote:

Salam, I would like to open a new account with Islamic bank of Bangladesh please let me know how can I do this from UK. I want to deposit some  money as well by Islamic way can you let me know about  the profit margine please

Thank you very much !

Answer:

Wa Alaikum as Salam Mostak,

Islamic Bank of Bangladesh has various deposit products. The most common is “Mudaraba Savings Account”. For the fact that you work in the UK, you could opt for “Mudaraba Foreign Currency Deposit Account”. This account is meant for Bangladeshi nationals residing, working and earning abroad and foreign nationals residing in Bangladesh. Following are the requirements for opening this account:

  • Complete account opening form (Download here)
  • 02 copies passport size photographs of account holder duly attested by the introducer
  • 1 photograph of the nominee duly attested by the account holder
  • Identification proof like National ID Card/Passport/Chairman or employer certificate
  • Minimum deposit US $1,000/-
  • Introducer’s signature
  • Profits will be distributed as per the regulations

For Mudaraba Savings Accounts, initial deposit amount is 500 Taka.

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