From my understanding, under Sharia banks cannot charge interest on lent money. Is this true? If so, how do Muslim banks make money? If only by investing deposits, isn’t that contributing to another party charging interest on monies lent?
capn
I heard that one arrangement for buying homes without an interest-bearing loan is as follows:
The bank buys the house and leases it to the tenant, while the tenant repays the principal. When the principal is repaid, ownership is transfered to the tenant. That way the bank earns money by collecting rent instead of interest on the loan.
Muslim banks charge interests just as any other bank in the world - in fact, no modern economy can do without interests, simply because the economy depends on
loans, and nobody would lend money to anyone without getting interest. Muslim banks just don’t call it interest, but as freido’s posting shows, there’s plenty of ways of circumventing an interest ban while still getting a result that practically ends up in interests.
Islamic banking terms and systems, from the Islamic Bank of Britain. Basically, what the other posters said - it’s interest, just by any other name.