What makes it halaal or haram is the “Contract”, wordings are important,
Concepts and instruments are Islamic. The issue is about their application. Usually, Islamic banks are applying them for their own profit.
Being a finance professional had come across a scenario in a listed company where the bank was sharing a profit under the Musharika agreement but when the company registered a loss bank asked to change the formula.
It’s not about names and terms they are using. It’s all about the concepts and practices they implement.
Islamic Banking is Haram
Firstly the term. Calling anything Islamic means it comes from Islam. And Islam was completed by the prophet Muhammad ﷺ.
Now there will be people who say that’s because it is within the bounds of Islam that’s why it’s called Islamic. Which doesn’t make sense, because if we take anything that was never approved by Islam and add Islamic elements to it, it shall not work. Like doing a robbery after performing ablution would still be haram.
Some of the company’s and individuals’ money pertains to interest-based businesses like NBFC, DFI, and AMC funds not always but 90% of deposits of these companies are interest base. Then Islamic Bank reinvests these deposits into different projects. The quest is whether the profit generated by Islamic Bank which they further distribute to their lenders shariah-compliant or not? Definitely, it turns out to be Haram if the gains are from companies that themselves rely on capitalism and/or do prohibited stuff trade. Also, banks are selling and buying currency notes which is totally haram. In Islamic banks, also sell and buy currency notes.
A lame remark often encountered by those opting for Islamic banking:
As mufti has endorsed it so even if it ain’t 100% Islamic you won’t share the blame (gunnah).
