Islamic Shari'ah or the divine law of Islam is derived from the following four sources
Prohibition of interest is not limited to Islam. It is also prohibited in Judaism and Christianity - for reference see Exodus 22:25, Leviticus 25:35-36, Deuteronomy 23:19, Psalms 15:5, Proverbs 28:8, Nehemiah 5:7 and Ezekiel 18:8,13,17 & 22:12.
First of all, as a believer we must accept all the injunctions of Islamic Shari'ah whether we understand the logic behind them or not. Secondly to give a brief answer to what this is, we would like to quote what one of the well-known Islamic scholars, Imam Al-Ghazali pointed out in the following words: "Riba (interest) is prohibited because it prevents people from undertaking real economic activities. This is because when a person having money is allowed to earn more money on the basis of interest, either in spot or in deferred transactions, it becomes easy for him to earn without bothering himself to take pains in real economic activities. This leads to hampering the real interests of the humanity, because the interests of the humanity cannot be safeguarded without real trade skills, industry and construction."
Islamic finance is an interest free finance system. It is asset based as opposed to currency based. A deal is structured on exchange or ownership of assets and money is simply the payment mechanism to effect the transaction. The basic framework of Islamic finance is based on elements of Shari'ah, which governs Islamic societies.
The major difference between Islamic finance and conventional banking is that Islam teaches us that money itself has no intrinsic value and forbids people from profiting by lending the money without accepting any level of risk. Interest cannot be charged. Wealth can only be generated through legitimate trade and investment. Any gain relating to this trading must be shared between the parties concerned.
The Holy Quran has used the word Riba to explain any excess taken on any type of loan. Through several Hadith, it is also proved that any amount taken, over and above the principal in a loan, is Riba whether it is for commercial or productive purpose or for consumption purpose. This is the conventional banking system that has classified two different terms as commercial interest for businesses and usury for consumption loan. For example, if Mr. X takes a loan from a bank to start a business then the amount he will pay to the bank regardless of profit & loss in the business would be called interest or commercial interest. On the other hand, if he takes a loan to purchase a computer for his personal use then the amount paid over and above the principal would be usury. But according to Islamic principles, both types are Riba and are not permissible.
Islamic banking is a system of conducting trade and banking activities in line with the principles of Islamic Shari'ah while avoiding all the prohibited activities such as interest or Riba, Gharar, financing of haram trade and businesses.
It is not banking which is based on pricing money and earning interest as conventional interest-based banks do but it is a system of trade where goods and services are sold and capital is invested by taking risk to earn halal profits. It is also not just change of name as many mis-understand but it is based on the Quranic injunction of 'Allah has permitted trade and forbidden riba'. Interest free banking is a subset of Islamic banking concept.
No. Islamic finance is available to anyone who may wish to use interest free banking. Anyone of any religious background is welcome to apply for products from Islamic.
Muslims in Kenya will have access and enjoy a banking service that is provided by a stand-alone Islamic institution and in accordance with Islamic shariah principles.
Gulf African Bank is the only standalone, Shari'ah compliant retail bank operating today. As a standalone bank, we make every effort to ensure that we do not compromise the principles of the faith.
Gulf African Bank currently has Kshs 1.75 Billion in start-up capital, which was raised by founder shareholders both in Kenya and in the Gulf.
The main difference between shari'ah compliant banking and conventional banking is that Islamic teachings says that money in itself has no intrinsic (fundamental) value and forbids people from profiting by lending it, without accepting a level of risk – in other words, interest (known as "riba") cannot be charged on money. To take money from money is prohibited- wealth can only be generated through legitimate trade and investment. Any gain/profit related to this trade/investment is shared between the person providing the capital and the person providing the expertise (Mudharabah). At Gulf African Bank, we generate all our profits through Shari'ah compliant trading and investment activities. We then share the profits with our customers at a pre-agreed ratio. In order to share profits you must hold one of our savings or investment accounts (term deposit accounts).
No. We participate in the risk of transaction and accordingly earn profit. Interest is fixed and does not require participation in risk. The fact that the profits we make through trade and share with customers are similar to interest rates is because we operate in a conventional economic environment. The safest and best way for you to judge is to check the value of what you would receive from conventional financial institutions. We make every effort to remain competitive so that our customers are not penalised by banking in a way that is true to their faith.
The validity of a transaction does not only depend on the end result but rather the steps followed in reaching the end. For example, a normal McDonald's burger in USA and Pakistan look the same, smells the same and tastes the same but the former is disallowed (haram) and the later is allowed (halal) for Muslims due to its compliance of Islamic guidelines of slaughtering animals.
The money our customers deposit into their savings accounts goes into a pool, which is then invested by us in Shari'ah compliant financing and investments. The profits generated from these activities are then allocated to different sources of funds raised by us. We aim to ensure that profit rates paid in all our savings accounts are market–competitive.
Interest/usury is likened to riba which is considered to be exploitative and forbidden by Islam and frowned upon by the major world religions. Thus Shari'ah compliant banks do not pay interest or receive interest.
Gulf African Bank does not engage in, or finance activities that are prohibited in Islam. It also shuns activities that are harmful to the society. For example, it would not finance sale of alcohol, tobacco and casinos (gambling). The Bank will engage in business that have tangible economic purposes and give positive benefit to the society at large.
Gulf African Bank is based on profit-sharing on the deposit side hence the higher the bank's profits the higher the depositors earnings. The bank will actively participate in trade and production of goods and services hence getting a profit on its assets products.
Gulf African Bank is a commercial Bank and will offer the following:
Gulf African Bank is going to carry out social service activities that will enhance, develop and benefit the Kenya community
There are various modes of financing in Shari'ah compliant banks. Some are similar to debt finance structures and others to equity structures. We plan to use all types of financing modes available in Shari'ah compliant banks. The financing modes that Gulf African Bank is offering to the Kenyan market are:
This mode can be used to finance fixed assets, particularly Housing, Plant and Machinery and Motor vehicles.
A Shari'ah compliant bank can facilitate/undertake such proposals. These can be done using the above mentioned modes of financing.
Yes, as long as they conform to the screening guidelines, each company stock has to be looked at and analysed to confirm it is Shari'ah compliant. The Shari'ah compliance focuses on two aspects of the company:
This is an area that is currently causing excitement in the market. It is recommended that an investor looking for a Shari'ah solution obtains approval from a competent Shari'ah Board before investing.
We undertake assets backed finance through modes of Islamic lease and diminishing partnership.
There are several key differences. With a conventional mortgage, you borrow money to buy a house and then pay the money back over a number of years. You are charged interest on the money you borrow, which contravenes Shari'ah principles. With our home-buying facility, Gulf African Bank shares with you in purchasing the property and you then pay rent on our share of the property. Over time you will be able to purchase our share and reduce your rentals.
You can do your banking through all branches of National Bank of Kenya and Cooperative Bank countrywide i.e for cash and cheque deposits only.
You will need to visit one of our branches, where you will complete an application form with your personal details and supply proof of identity documentation before we can open an account. Our branch staff will be happy to answer all your queries and help open an account for you.