Islamic banking

The Islamic Banking ( english islamic banking ; Arabic مصرفية إسلامية, DMG maṣrifīya islāmīya ) is part of Islamic finance and conducts Islamic banking business .

General

The international banking system consists of credit institutions , securities service companies , investment banks , financial services institutions and all other types of banking-related companies organized under private law, for which the operational purpose entirely or predominantly includes financial services . The attribute “Islamic” indicates the religion-related peculiarities of this service sector . Banking transactions must therefore be in accordance with the religious rules of Islam , the legal sources of Fiqh and Sunna and Sharia . The classic western banking business such as credit business , deposit business , investment business or other interest-bearing business cannot be used in their usual form in Islamic banking.

The international credit transactions , international payments and interbank trading are of free movement of capital , freedom to provide services and freedom of contract coined. These principles contradict all financial contracts that are subject to the Islamic rules of the general prohibition of interest ( Ribā in Arabic ), the prohibition of speculation ( gharar ) and the prohibition of gambling ( maysir , qimār ). The freedom of contract, however, enables Western banks to establish business relationships with business partners who act according to Islam. The general prohibition of interest prohibits Islamic credit institutions from engaging in interest-bearing banking transactions which, however, form the basis for the normal market lending or deposit business of non-Islamic banks. In order to still be able to carry out such interest-bearing transactions with Islamic business partners, the market participants have developed new financial contracts on the basis of loan agreements in kind , which are Shari'a-compliant based on legal opinions ( fatwa ). Acting in conformity with Shari'a means structuring financing , insurance , consumption and investments strictly according to the Islamic rules of faith. For the Islamic financial institutions, the Koran and the Sunna set the religious and legal framework and also form the social and ethical foundation for the entire Islamic financial system.

Not for the Islamic banking system is one of the so-called hawala financial system.

history

In the Islamic cultural area, the Mudaraba developed from the 6th century - i.e. still in pre-Islamic times - which still represents an important type of Islamic banking to this day. It emerged as a silent society in which an investor provides the capital and the entrepreneur does the work . It is considered the legal predecessor of the Italian Kommenda ( Italian commendare , "to entrust"), which first appeared in May 1072 in Venice. In the 11th century, the Musharaka also seems to have occurred in Egypt . In the Ottoman Empire , which began in 1299, there was an interest-oriented banking system despite the Islamic interest ban in order to be able to finance the high government spending . Its banking system was dominated by Greeks, Jews and Armenians. The Jewish banker Joseph Nasi moved to Constantinople in 1554 , where he worked for the Ottoman court.

During the Middle Ages , at the same time, there was largely the prohibition of interest in Christianity (only not for Jews), Jews among themselves had the prohibition of interest ( Hebrew neshek, "Abiss"), however, note. While the Christian interest prohibition gradually relaxed and was formally repealed within the Catholic Church by Pope Pius VIII in a letter of August 18, 1830 to the Bishop of Rennes , a counter-movement occurred in Islam.

The Mit Ghamr Local Savings Bank, founded in Egypt in 1963, is considered the first Islamic bank . Its foundation can be traced back to the Egyptian Ahmad an-Naddschār (1932–1996), who received his doctorate in 1959 under Heinrich Rittershausen at the University of Cologne with a thesis on "Obstacles to direct foreign investments in Egypt". During his stay in Germany, he studied the German savings bank system and began in 1963 with the support of Rittershausen and Günter Schmölders in the Egyptian town of Mit Ghamr to set up an interest-free savings bank which, within a short period of time, gained 200,000 savers, mostly from rural areas. Instead of interest, savers were given the right to interest-free loans for their deposits and, in emergencies, support from a religious donation fund. Larger savers were also involved in an investment fund, which guaranteed them pro rata profits. In 1967, however, the project was ended by Gamal Abdel Nasser . This was followed as a financial institution by Tabung Haji , created in Malaysia in 1969 .

Ahmad an-Najjār returned to Egypt in 1971 after stops in Sudan and Germany and became a member of a commission of experts from Islamic countries to establish an Islamic banking system. In 1972 he published his book “Interest-free banks as a strategy for economic and social development in Islamic countries”. In 1972 he became a member of the Preparatory Committee of the Organization of the Islamic Conference (OIC) in Jeddah for the establishment of the Islamic Development Bank . A conference of Islamic foreign ministers in Cairo in February 1972 prepared alternative proposals for dealing with financial matters. Ahmad an-Naggār summarized in 1977 in his book “The Path of Islamic Awakening. Banks without Interest "( Manhaǧ aṣ-ṣahwa al-Islāmīya. Bunūk bilā fawāʾid ) summarizes the difference between Islamic and ordinary banks in three points:

The Islamic bank also accepts small deposits , while the ordinary bank is not interested in small investments.

The Islamic bank makes a conscious effort to empower people to “ pursue their interests on the path to God” ( taḥqīq maṣāliḥihim ilā ṭarīq Allaah ), while an ordinary bank seeks only profit .

The Islamic bank sees itself as part of a general Islamic organization whose task is to serve Islamic society, while the ordinary bank sees no relationship between itself and the surrounding society.

In doing so, he overlooked the fact that, for example, savings banks also accept the smallest of savings deposits and that credit institutions are generally responsible for safeguarding customer benefits as part of their advice liability .

Pakistan began its first attempts to Islamize its banking world in 1977 . In 1979, during the Islamic Revolution, Iran enshrined the interest prohibition in its constitution, the legal implementation of which lasted until March 1984. He nationalized his banking system in June 1979, and since March 1985 all banking transactions here have been based on Islamic law. In September 1983, Sudan enacted the Shari'a laws so that all banks were covered by the interest ban.

As the first bank that took into account the Islamic ban on interest on all banking transactions, which was founded in 1971 and is considered state property located Nasser Social Bank in Cairo, followed by, among others, the Islamic Development Bank ( Islamic Development Bank , October 1975), the Dubai Islamic Bank (1975) , the Faisal Islamic Bank of Egypt (1977), the Kuwait Finance House (1977), the Jordan Islamic Bank (1978), the Faisal Islamic Bank of the Sudan (1979) or the Bahrain Islamic Bank (1979). With the Islamic Banking System International Holdings , the first European Islamic bank was established in Luxembourg in 1978 . In the meantime, the Islamic financial contracts Murabaha established themselves in 1976 and Takaful as life insurance in 1979 . In Switzerland , the Dar al-Mal al-Islami opened its doors in 1981. In July 1983, the first Malaysian Shari'a-compliant bank, Islam Malaysia, opened . Since then, the addition "Islamic Bank" has indicated that a bank conducts Shari'a-compliant banking and is monitored by a Shari'a board. Since 1985, 50 conventional banks have also offered Islamic financial products. In February 1990, the Accounting and Auditing Organization for Islamic Institutions (AAOIFI) was established in Bahrain , responsible for standardization , checking compliance with Shari'a and accounting for Islamic financial products . In 1992, the Pakistani Federal Sharia Court saw all forms of interest-taking as a violation of Sharia law . In August 2004, the Islamic Bank Of Britain was the first retail bank in Great Britain . In Germany , since March 2015, KT Bank AG has been the first and so far only bank under German law that offers financial products and services in accordance with Islamic rules. In 2016, the AAOIFI published 48 Shari'a standards, 26 accounting standards and 5 auditing standards .

Types of Islamic Banking Operations

Because of the fulfillment of the Islamic business principles, Islamic banking transactions are structured completely differently than conventional banking transactions .

Business principles

Islamic banking must adhere to the five principles of Shari'a:

The absolute prohibition of interest ( ribā ): Financial contracts may not bear interest. All credit and deposit transactions that result in credit or credit interest are therefore prohibited . However, rents or leasing fees are permitted .
Prohibition of gambling and wagering ( maysir ): Derivatives are considered a bet and are prohibited - even as pure hedging .
Prohibition of speculation and risk ( gharar ): Share trading with purely speculative interests such as day trading are prohibited, share purchases with the intention of long-term participation are permitted. Short selling is prohibited .
Prohibition of unethical business ( haraam ): arms trafficking , drug trafficking , tobacco , alcohol consumption , pork , prostitution and pornography . Banking transactions may not include these transactions .
Principle of profit and loss sharing : As an entrepreneur, the investor participates in the profit or loss and is not a believer .

Banking

The following banking transactions meet these requirements:

Checking accounts
- Wadīʿa (وديعة, from wadaʿa , “to put on”; also Wadiah ): the bank keeps the bank
  balance of the customer in trust , who can claim the money back at any time. Instead of credit interest , the bank has the option of free services or gifts ( hibah ). However, the bank is not allowed to promise these voluntary benefits because this would amount to a payment of interest.
  - For Wadiah Yad Dhamanah accounts (يد ضمان, DMG Yad Ḍamān ), unlike Wadiah-Yad-Amanah accounts , the bank guarantees the full repayment of the deposit. To do this, it must obtain the consent of the customer when reinvesting the deposits and may keep all profits, but must also compensate for any losses. Gifts are common for this account variant. Most savings accounts where security is paramount are held in the form of Wadiah Yad Dhamanah accounts .

Credit cards do not conform to Islamic principles, while debit cards , i.e. payment cards on a credit basis, conform to the ideas of Islamic banking.

Investment funds : The Dow Jones Islamic Market Index with its sub-indices is often used as a benchmark for Islamic investment funds . It has been determined since 1999 and comprises shares that, in the opinion of the "DJIM Shari`ah Supervisory Board", may be acquired in accordance with Islamic law. In December 2006, Standard & Poor’s announced the introduction of a family of Islamic stock indices. In addition to the S&P 500 Sharia for the American stock market, a European S&P Europe 500 Sharia and a Japanese S&P Japan 500 Sharia Islamic index are also determined. Another highly regarded index is the FTSE Islamic Index. One of the leading advisory firms for Shari'a-compliant investment funds is Failaka Advisors . Every year, the Failaka Islamic Fund Awards recognize the best investment funds. The annual Failaka Islamic Funds Report , which has been published since 1996, is now an important metric in this special area of investment funds.

Financial instruments

Murabaha ( "resale at a premium"; of RIBH , "profit"): the most common form of Islamic debt financing , in which a financial institution to finance fall merchandise ( commodities acquires) and then with a profit margin ( english add-on , or mark -up ) resold to the Islamic buyer who pays them at a later date. The add-on corresponds exactly to the loan interest and the repayment . About 75% of all Shari'a-compliant contracts are based on this construction.

Tawarruq ( German "to make liquid" ) consists of two sales contracts and is controversial among Islamic legal scholars. In the first sales contract, thegoods are handed over immediatelyagainst the payment term ; in the second sales contract, the buyer hands over the goodsfrom the first sales contract step by step against payment , which he can forward to the seller from the first sales contract at the end of the payment term ("reverse Murabaha") ). It can be used for rescheduling .

Istisna ( German "let someone build" ) is an object financing or project financing in the form of a forward , in which the object to be financed represents a building that isstill to be built. It is similar to the work contract , but the building is onlypaid forafter it has been completed at a previously agreed fixed price .

Idschara ( German for “rent” ) is a leasing model in which the lessor, as the owner, allows the lessee to use the leased property for leasing fees. A purchase option in favor of the lessee is not permitted.

Sukuk /صكوك / ṣukūk (from sakk , "certificate"): the Islamic bond grants the bondholder a share of the ownership of the bond debtor's assets and is therefore to be classified as an asset-backed security that may not be considered Shari'a-compliant. There is no interest on the loan, but a share of the income from the financed assets (such as rent). Rental income can be linked to reference interest rates such as LIBOR .

Mudaraba ( German for “speculation” ) is a silent partnership in which the investor provides the entrepreneur with a capital stake with a pro rata share in profits and losses .

Muscharaka (from shirkat , “together”) is equity finance with full profit and loss sharing.

These financial instruments have numerous subspecies. The AAOIFI monitors the standardization of these financial contracts, the checking of their conformity with the Shari'a and the accounting . In 2016, the AAOIFI published 48 Shari'a standards, 26 accounting standards and 5 auditing standards .

The occasional claim that Islamic financing instruments are more debtor-friendly than conventional financing is incorrect. Lose the borrower (the only no formal borrowers) as at Murabaha or Ijara their debt sustainability and to the actual debt service (such as the add-on in the Murabaha or lease payments in Ijara) no longer wear ( English non-payment ), thus triggering this also results in a termination ( loan termination ) for the financial contracts mentioned . It does not matter whether someone can no longer pay interest and amortization or rent / leasing fee.

Bank types

There are three different banking groups in Islamic countries:

Development banks ( english development banks ) focus on the economic development of Muslim countries of the Third World .
Islamic banks ( English Islamic banks ) offer a limited range of Islamic compliant financial products and are monitored by their own Shari'a supervisory board.
Commercial banks ( English merchant banks ; often branches or subsidiaries of major international banks ) offer all western banking transactions. The Gulf International Bank established in Bahrain in November 1975 by the Gulf Cooperation Council and Iraq is a case in point.

In Islamic states with strict Shari'a application, western commercial banks are only allowed to offer Shari'a-compliant financial products.

documentation

From the point of view of the major international banks, the external financing is credit business . The non-Islamic credit institutions classify this debt financing as loans , the Islamic business partners as borrowers and the transaction as a credit transaction with credit risk . The Islamic business partners are given a rating . The loan agreements are based on the standard agreements of the Loan Market Association with the participation of international law firms . Conformity with Islamic law is ensured on the one hand by the AAOFI and on the other by Islamic legal opinions ( fatwa ) by legal scholars ( ʿUlamā ' ). After IFRS prepare balance sheets of major international banks may these transactions after the accounting principle of the primacy of content over the form ( English substance over form , economic approach under IFRS 9, 10) won as interest-bearing loans.

Legal risks for non-Islamic banks can arise from the lack of enforceability of the contracts. Legal risks have been part of operational risks in the banking system of the EU member states since January 2014 and are therefore not part of the banking operations. The legal definition of operational risk in Art. 4 (1) No. 52 Capital Adequacy Ordinance (CRR) expressly includes legal risks. Art. 194 no. 1 CRR required for all collateral that banks the legal validity check "all relevant jurisdictions" and enforceability in and repeat for continuous enforceability of this test, if necessary. Legal Opinion (English legal opinions ) provide for contract creation that legal risks or confirm that the contracts at the time of the review lawfully (English legally ) valid (English valid ), bind (English binding ) and enforceable (English enforceable ) are.

meaning

According to Ernst & Young , the industry had $ 778 billion in business in 2013 and has grown 17% annually since 2009. In various Muslim countries such as Saudi Arabia , Kuwait and Bahrain , the market share would be 48.9%, 44.6% and 27.7%. 21 Islamic banks have a market capitalization of over USD 1 billion.

Since 2006, German banks have also been offering Islamic financing instruments, especially DWS Investments , the Deutsche Bank Group's fund company . It offers numerous funds and “sukuks” that are either managed in-house or sponsored together with partners such as the Ithmaar Group in Bahrain . The largest Sharia-compliant fund that Deutsche Bank offers Islamic customers was the “DWS Noor Islamic Funds” at the beginning of 2007 with subscribed values totaling USD 2 billion. The Commerzbank , however, has resolved its launched in 2000. "Alsukoor fund" the end of 2005, he allegedly found and according to self-representation too few buyers was actually established only at the request of a Saudi Arabian family. The UBS , Switzerland's largest bank and leading asset managers in the world, liquidated the end of 2006 its Islamic banking subsidiary was only founded in late 2002 "Noriba" in Manama . For cost reasons, their businesses have been reintegrated into the head office and the Middle East regional area in Geneva . Since at the same time both UBS and Commerzbank gave in to the insistence of the USA and parted ways with all clients in Iran for political reasons , Swiss specialist journalists suspected political pressure from the Bush administration as the real reason and complained about the migration of specialist staff to Deutsche Bank. Unlike in Great Britain , there was no Islamic bank in Germany until 2010, but rather “Islamic windows” of conventional banks. In 2010, the KT Bank opened in Mannheim , initially as a branch and to broker third-country deposits to the parent company Kuveyt Türk Katılım Bankası in Istanbul , majority owned by Kuwait Finance House . In March 2015, BaFin granted KT Bank a license as a deposit-taking credit institution . Thus the KT Bank is the first Islamic bank in Germany and the entire euro zone . On October 3, 2006, the Swiss Federal Banking Commission (SFBC) granted Faisal Private Bank Switzerland in Geneva a banking license as the first purely Islamic private bank in the country , which the owner returned in 2012 to continue the business as a family office .

In Europe, according to a study by the European Central Bank , the economic importance is low.

literature

Daud Vicary Abdullah and Keon Chee: Islamic Finance, Why it Makes Sense , 2010, Marshall Cavendish International (Asia) Pte Ltd, ISBN 978-981-261-599-2
Daniel K. Bergmann: Islamic Banking - A Study Guide , Norderstedt (Germany), 2008, 150 pages, ISBN 978-3-8334-8974-7 .
Daniel K. Bergmann: Islamic Banking , BoD, 2008, ISBN 978-3-8334-8974-7 .
Michael Gassner, Philipp Wackerbeck: Islamic Finance . Bank-Verlag Medien , 2010, ISBN 978-3-86556-211-1 .
Karim El-Gawhary : Islamic Banks in Egypt. Social responsibility or parasitic pursuit of profit , Verlag das Arabische Buch, Berlin 1994, ISBN 3-860930427 .

Shayerah Ilias: Islamic Finance: Overview and Policy Concerns (PDF, 6S .; 181 kB), Congressional Research Service, engl.

Hatem Imran: Islamic Business Law. Norms and principles of an alternative economic system , Salzwasser Verlag, 2008, ISBN 978-3-86741-092-2 .

Michael Mahlknecht: Islamic Finance: Introduction to Theory and Practice , 2008, Wiley: Klartext, 325 pages, ISBN 978-3-527-50389-6 .

Michael Mahlknecht: Islamic Capital Markets and Risk Management , 2009, Risk Books, London, ISBN 978-1-906348-17-5 .

Volker Nienhaus: Islamic Economics in Practice: Interest-Free Finance in W. Ende, U. Steinbach: Islam in the Present. 5th edition Munich 2005. pp. 163-198.

Andreas Abu Bakr Rieger : Away with the interest , Kai Homilius Verlag , Werder (Havel) 2011 ISBN 978-3-89706-426-3

Zaid El-Mogaddedi: Sukuk growth market .