Islamic Banker Asia publish this comprehensive document in its 8th., 9th, 10th issue of publication.

1. ISSUE 10 2014 / Islamic Banker ASIA / 73
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BANKING IN ISLAM OR
ISLAMIC
BANKING
- PART 3
The Prophet (PBUH) said:
“The truthful honest merchant is with the Prophets May peace
be upon him, as the truthful and martyr (in the Day of Judgment).
Spending in good causes for the benefit and welfare of the
people and wastefulness and over and excess in pleasurable
activities are prohibited.Upholding justice in all dealings and
transactions with both friends and enemies.”
(Quran 4:29, 4:135)
By PROF. YOUSUF IBNUL HASAN
BAIT-AL-MAAL CONCEPT
In Islam, the idea of institution for
keeping goods and money came after
the death of Prophet Mohammed
(Peace be upon Him). Omer Farooq
(R.A.), the third Caliph of Islam
introduce the concept of Bait-Al-Maal.
The term Bait-Al-Maal means “Door
of wealth.” To deliberate the matter
one can imagine and visualise the
activities that take place at the banks
140 Million Muslims. From 1977 to
1988, the state head asked economists,
jurists, religious scholars and bankers to
make joint efforts in the development
of interest free economic system
on priority basis. He appointed a
commission of senior bankers and
economists.
The members drafted the
memorable and most authenticated
documents on the subject and
gave reasons, justifications and
recommendation for the elimination of
Riba from the monetary and economic
affairs. To support the recommendation
the then President of Pakistan in 1987,
permitted Geneva based Pan Islamic
financial group The Dar-Al-Maal Al
Islami to open its first branch of their
banking company, Massraf Faysal Al
Islami Al Bahrain as milestone towards
banking on the principles of Islam.
The first attempt had proved the great
success and with the passage of time, in
between 1987 to 1995 the bank shown
tremendous growth. In 1994 Massraf
which are not transparent at any part
of the world. Islam emphases on the
matters and activities pertain to finance
and money to be pure and transparent
between the parties of the transaction.
So if the basic essence of Islamic
teaching is not taken into consideration
then there is no right of the institution
to call itself as Islamic.
Keeping in view the concept of
Bat-al-Maal we take the example of
Pakistan, which has a population of
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2. ACADEMIC VIEW I BANKING IN ISLAM OR ISLAMIC BANKING - PART 3
74 / Islamic Banker ASIA / ISSUE 10 2014 Faysal Al Islami Al Bahrain change
to Faysal Bank Limited by adopting
all Riba products and practices under
the new management, competent
in conventional banking system and
declaring the system as orthodox and
non profitable.
The drafted recommendation went
into unknown stores with the death
of the then President and new rulers
filed a suit against the implementation
of Interest Free Banking in Pakistan.
As a result four governments in
Pakistan, headed by Muslim had to
suffer downfalls and disgrace due to
attempting against implementation of
Riba free economic system.
Today conventional bankers are
the authority by designing and then
implementing their overnight-impaired
system which is far beyond the Islamic
teachings on Money Matters. Till today
the applied Islamic Banking remain
authenticated from those religious
scholars who lack the economic, finance
and wealth theories and practice.
The interest is treated as the
alternate to Riba without realizing
the fact that interest is formed by
adopting any form of Riba. In the
lending or borrowing transactions
between the parties if there is any
exploitation, cruelty, discrimination, or
embezzlement or misuse of status in the
transaction.
The present Islamic Banking System
and the financial matters of the Islamic
Finance Houses in Pakistan are not in
accordance to the Islamic Economic
System. So as the know how to the
system lacks to the masses that keep the
masses away from the system.
Malaysia took a vise decision by
introducing the concept of Interest Free
Financial System and it Instructions
at the academic level. In short span of
time, reasonable work-force develop on
the system who understand the soul and
the life of the system.
SYSTEM AND BELIEF:
Massraf and system of Massraf follow
the belief in the economy with certain
conditions given below:
a. RIBA is excluded from dealings in
general and replaced by principles of
participation.
b. Country’s needs of financing are
made through taxes or seeking sources
of financing by foreign participation.
c. Central bank of a country can-not
participate in non-rationalized or non-
Massraf does not lend
or borrow the funds as
the system does not
justify the landing and
borrowing as it leads
to the interest.
insurance or the social insurance the
participation of Massraf is priority.
k. These are classified priorities of
Massraf as the essential spending to
preserve the well- being of the country.
l. Such spending leads to a welfare state
and socio- economic development
which is the main theme of the Islamic
Economic.
m. The principals of participation in
the financing provide more chances of
employment, operating of resources
and directing money that give energy
to the prospective of community which
in reality, is the original function of
money.
With the above facts the two
systems which have their own principles
differentiate the banking priorities. The
difference is seen as:
CONVENTIONAL BANKS
a. Main purpose of conventional banks
is to make earning on each transaction
and services that they execute or
provide.
b. Their existence does serve positive
role in economic development of the
community.
c.They also provide services to
community as an ultimate goal or target
to earn for the growth of the institution
d. Their materialisation is an individual
passion to trade in funds and become
wealthy through their customers and
community.
e. They only serve for the development
in the best interest of their own
institution at first and community as
secondary.
f. Economists have exposed after a
great study on the business practice of
conventional banks that they do render
a great service as regards to finance
requirements.
g. Their finding concludes that owner
productive expenditure in Islamic State
d. Massraf houses cannot participate
with central bank in non-rationalised
spending.
e. No cooperation exists among
individuals and banks in unproductive
transaction.
f. Massraf houses protect and disallow
matter that causes inflation, increase
of public dept, non-rationalised
expenditure and the increase of quantity
of money without cover to issuance.
j. Increase in the government
expenditure towards the returns having
more chances of employment, more
social services such as health, education,
old age benefits, unemployment

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ISSUE 10 2014 / Islamic Banker ASIA / 75
of these banks emphasises on more
wealth, more domination and extreme
exploitation.
h. The economists do not find a way
to get rid of the bad effects because
community could not avoid the bank’s
services.
j. It led to the elimination of such bad
effects which accompany the existence
of conventional bank
k. Conventional banks moves resources
and lend these resources on fixed return
to those who need funds for their
business or personal utilisation.
l. The purpose of the lending remains
only to generate income, rightly or
wrongly.
m. The objective is always to earn
interest by purchasing & hiring funds.
MASSRAF HOUSES
a. Massraf Houses mobilise resources
and invest by way of financing on
profit and loss sharing basis with the
aim to assist the user in healthy venture
that serves the economic as well as
socio-economic development for the
community.
b. The main purpose of financing is to
give financial assistance with intentions
of development of a community
c. To emphasise on curbing the inflation
d. To produce commodities useful
the Riba based system because it is the
belief of Massraf that, “No Islam exists
in a place where there is Riba based
system”.
Further to this fact it can be
elaborated as, “Do not expect the
prosperity for mankind in the
declaration of war against Almighty
Allah against Interest by men”.
Dr.Ahmed Al Naggar, Pioneer member
to the concept of Massraf as Banking,
International Association of Islamic
Banks.IBA
for mankind and significantly make
reasonable profit that is gained without
exploitations.
e. The role of Massraf Houses is
common and comprehensive.
f. Their most advantageous goal is to
establish the socio economy and the
development of communities. That
means that gaining profit is not a
fundamental goal of their foundation.
g. Massraf Houses operates on
the principles of socio economics
and determined on the economic
development of the community without
domination or exploitation.
h. Honesty & Fair trade: (Thus, trade
No such religion
permits the
involvement of its
name where there
is a slight doubt of
misdeed in functions.
manipulations & malpractices like
hoardings, black marketing, cheating,
profiteering, short-weighting, hiding
the defective quality of merchandise
and adulteration are all prohibited
activities). All customers must be treated
equally (e.g. when imposing charges
and fixing profit – sharing ratios).
i. The prohibition of Gambling and
other risk related purely speculative
activities based on mere luck (most
derivatives are prohibited)
CONCLUSION
The bases of Massraf under Islamic
thoughts have a conflict directly with
About the writer:
Yousuf Ibnul Hasan was borned on
21st July 1953 in Rawalpindi, Pakistan.
In 1981, he received a scholarship
to study in Central America where he
completed his Masters in Industrial and
Business Management from University
of Wales Indies. In 1983, Yousuf was
selected to study Islamic Banking and
Finance for a newly established pan
Islamic Financial Group Dar-Al-Maal-
Islami Switzerland and completed his
Post Graduate studies from International
Institute of Islamic Banking and Islamic
Economics, Egypt and Turkish Federat-ed
State of Kibris. Yousuf joined IQRA
University as Programme Consultant for
Applied Finance and has trained over
10,000 students in Islamic Banking,
Finance and Economics.including over
1000 non-Muslim students. At IQRA,
Yousuf developed courses on Islamic
Banking, Takaful, Economics & Finance,
Commercial Banking Management,
Islamic Jurisprudence and Media Law.