In mushakarah, what happens if the house appreciates in value? Would payments then increase with market value? Would the homeowner be buying the banks equity at market or book value?
My understanding is that no, they wouldn’t. The payments change according to how conventional banks structure interest.
In the alternate case whereby payments are tied to the home’s market value — if the home depreciated in value, the bank could lose money, which would be hard to justify to its risk management team.
It would also require frequent payments to certified property evaluators.
The payment would increase and then paid off in the ratios agreed to by all the parties beforehand. So for arguments sake, say the ratio agreed to was 40-10-20-30; with the “homeowner” being the 40. So instead of the full “100” of the increase, he would pay 40 whilst the other three parties pitch in the other 60. This model guarantees a Clan Superstructure btw. This is precisely why all 3-4 generations live under the same roof; because it is made feasible given Aforementioned risk sharing. There is no “Nuclear family” thus in most of the Islamic world.
It’s a practical explanation. Most of my relatives bought real estate in the West in this manner. They never shouldered the full burden of an increase in (say) the monthly payment. A portion was always “paid off” and shouldered by relatives and family in a manner similar to above.
I have a cousin in Vancouver who “would have had to” pay 3500 for rent (he did not want a mortgage). He went to a sharia compliant financial institution with my father and uncles. They agreed on some ratios and now he pays a mere 1500. In exchange (and this was agreed to outside the “banking” structure) he spends around 20-30 hours every week assisting my dad and uncles in their various business ventures. This is just Clan mechanics 101.
Sure, but this kind of agreement can be done via a conventional mortgage too. It just means divvying it up between family members. Not an argument in favour of Islamic finance.
Islamic Banking (at the atomic level) is about sound contracts. If the world financial system is such that the “dust of riba (i.e. usury) is everywhere”, said contracts can alleviate, but will fall short of fully “separating”, from said problems. Relevant: https://seekersguidance.org/answers/hanafi-fiqh/islamic-banking-west-video/
Hardly. Western “banking” has always been focused less so on contracts and moreso on mathematical abstracts. It’s not an accident that the focal points of western banking (Northern Italy, Swabia, etc) were also hubs for great mathematical thinkers: the two are intricately linked in history and pursuit.
What is my argument in your eyes? I simply stated a historical fact: Western banking is intricately tied to mathematical abstract notions that do not have any basis in the real world. “Compound growth” does not exist in the natural world; or is this a “controversial” claim?
> I wish Christians took the Bible’s ban on usury as seriously as Muslims take the Quran’s.
That Christians didn't is why it was Christendom that discovered how to sail to the rest of the world, had the industrial revolution, and ultimately colonized most of the Islamic world.
Access to usurious finance was extremely limited during the Age of Exploration and the Industrial Revolution. The latter in particular was not reliant on finance capital.
> Access to usurious finance was extremely limited during the Age of Exploration and the Industrial Revolution.
It was available where it mattered, it's no coincidence that many early explorers, like Columbus, came from Genoa, which had the most sophisticate system of finance back in those days. Sophisticated enough to finance highly speculative endeavors, like voyages into uncharted waters.
Read the article I linked to. It describes some of the tricks they had to pull in order to avoid usury laws. Most of them were far more sketchy then what you critiqued in the OP.
You should start by defining “usury” and the spirit of the Jewish/Christian prohibition against it. You would also need to explain the Jewish practice of the financial Sabbath whereby debt is forgiven in given years. The context is the abuse of the poor by the rich, not business deals between equals. Inflation caused by monetary policy and government spending is inherently usurious as it defrauds all, but is especially detrimental to the poor.
There is disagreement among scholars about the specifics of the OT teaching on usury and interest. Regardless, the prohibition of unscrupulous dealing with those in a weaker position is clear.
This was fascinating and cleared up a lot of questions I had. Thank you.
Nobody works for free. Because there’s no such things as a free lunch, or free healthcare, or free education!
In mushakarah, what happens if the house appreciates in value? Would payments then increase with market value? Would the homeowner be buying the banks equity at market or book value?
My understanding is that no, they wouldn’t. The payments change according to how conventional banks structure interest.
In the alternate case whereby payments are tied to the home’s market value — if the home depreciated in value, the bank could lose money, which would be hard to justify to its risk management team.
It would also require frequent payments to certified property evaluators.
Hope that makes sense.
The payment would increase and then paid off in the ratios agreed to by all the parties beforehand. So for arguments sake, say the ratio agreed to was 40-10-20-30; with the “homeowner” being the 40. So instead of the full “100” of the increase, he would pay 40 whilst the other three parties pitch in the other 60. This model guarantees a Clan Superstructure btw. This is precisely why all 3-4 generations live under the same roof; because it is made feasible given Aforementioned risk sharing. There is no “Nuclear family” thus in most of the Islamic world.
This makes zero sense, and I don’t believe addresses the question being posed.
It’s a practical explanation. Most of my relatives bought real estate in the West in this manner. They never shouldered the full burden of an increase in (say) the monthly payment. A portion was always “paid off” and shouldered by relatives and family in a manner similar to above.
I see. Hindus do something similar afaik. Indians in general I believe.
Hindus do have strong clans as well. The way they share the cost burden is quite different from how we do it however.
Not really. It’s pretty much the same.
This is just an argument for more extended families -- not an argument for Islamic banking.
I have a cousin in Vancouver who “would have had to” pay 3500 for rent (he did not want a mortgage). He went to a sharia compliant financial institution with my father and uncles. They agreed on some ratios and now he pays a mere 1500. In exchange (and this was agreed to outside the “banking” structure) he spends around 20-30 hours every week assisting my dad and uncles in their various business ventures. This is just Clan mechanics 101.
Sure, but this kind of agreement can be done via a conventional mortgage too. It just means divvying it up between family members. Not an argument in favour of Islamic finance.
Mashallah
Good app for blog
Islamic Banking (at the atomic level) is about sound contracts. If the world financial system is such that the “dust of riba (i.e. usury) is everywhere”, said contracts can alleviate, but will fall short of fully “separating”, from said problems. Relevant: https://seekersguidance.org/answers/hanafi-fiqh/islamic-banking-west-video/
In theory, sure.
In practice, Islamic banking mimics Western banking using legal trickery.
Hardly. Western “banking” has always been focused less so on contracts and moreso on mathematical abstracts. It’s not an accident that the focal points of western banking (Northern Italy, Swabia, etc) were also hubs for great mathematical thinkers: the two are intricately linked in history and pursuit.
Whatever you say buddy lol.
Not the best of rebuttals, but I shall take it in a positive light as a compliment!
I just wrote an entire article (see above) disproving your argument -- which is a red herring anyway.
What is my argument in your eyes? I simply stated a historical fact: Western banking is intricately tied to mathematical abstract notions that do not have any basis in the real world. “Compound growth” does not exist in the natural world; or is this a “controversial” claim?
> I wish Christians took the Bible’s ban on usury as seriously as Muslims take the Quran’s.
That Christians didn't is why it was Christendom that discovered how to sail to the rest of the world, had the industrial revolution, and ultimately colonized most of the Islamic world.
No.
Access to usurious finance was extremely limited during the Age of Exploration and the Industrial Revolution. The latter in particular was not reliant on finance capital.
> Access to usurious finance was extremely limited during the Age of Exploration and the Industrial Revolution.
It was available where it mattered, it's no coincidence that many early explorers, like Columbus, came from Genoa, which had the most sophisticate system of finance back in those days. Sophisticated enough to finance highly speculative endeavors, like voyages into uncharted waters.
https://unenumerated.blogspot.com/2006/10/genoa.html
Joint stock companies, venture capital, and insurance are not ‘usurious.’
That wasn't quite clear at the time.
In any case, if you follow down this route, you'll end up engaging in the same type of hair splitting you criticized in the OP.
Usury was clearly defined as the charging of interest on a loan. The claim that the aforementioned structures were usurious is ahistorical.
Read the article I linked to. It describes some of the tricks they had to pull in order to avoid usury laws. Most of them were far more sketchy then what you critiqued in the OP.
You should start by defining “usury” and the spirit of the Jewish/Christian prohibition against it. You would also need to explain the Jewish practice of the financial Sabbath whereby debt is forgiven in given years. The context is the abuse of the poor by the rich, not business deals between equals. Inflation caused by monetary policy and government spending is inherently usurious as it defrauds all, but is especially detrimental to the poor.
No.
All interest payments were considered usurious in historical Christianity.
Just read the texts of the early Church councils which condemned usury.
There is disagreement among scholars about the specifics of the OT teaching on usury and interest. Regardless, the prohibition of unscrupulous dealing with those in a weaker position is clear.
Disagreement among scholars is immaterial to what the early Church councils actually decided — which is that usury is interest on a loan.
Historical Christianity has for this reason eschewed interest.
The Fathers weren’t always right, though worthy of honor.
One might wonder why an ox, an axe or a man could be hired but not a shekel.
The Fathers in council represent the views of the whole Church. That’s the point.
It’s not relevant for my point here whether they were ‘correct’ or not, but I put more weight on them than on modern-day, foolish scholars.