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Q: Some Conventional Banks offer Islamic Finance Services. How does one explain the permissibility of Islamic Finance within a Conventional System primarily operating on Interest basis? How islamic is such an Islamic Financial service. A: In principle, it is permissible for Muslims to deal with non-Muslims. assuming Muslims were not allowed to deal with non-Muslims, this would lead to lots of difficulties. Living in this material world, the need will arise for us to interact with non-Muslims and to transact with them. The confusion amongst the Muslims regarding the impermissibility of dealing with the bank stems from the type of transaction they had entered into. It is impermissible for a Muslim to enter into any transaction with the bank which involves paying or receiving of Interest. If there is no involvement in interest, the transaction will be permissible as long it is Sharī῾ah compliant. Just as it is permissible for Muslims to deal with non-Muslim out of the banking system, it will also be permissible to deal with them within the banking system, as long as there is no transgression of the laws of Sharī῾ah. Consider the following examples: If it is permissible for a non Muslim to purchase a property and to sell it to a Muslim for a profit (Murābahah), why will it not be permissible for the bank (non-Muslim) to purchase a property and sell it to a Muslim on a Murābahah basis?· If it is permissible for a Muslim to enter into a partnership with a non-Muslim (as long as everything is Sharī῾ah compliant), why will it not be permissible for a Muslim to enter into a partnership with the bank? Islamic finance is a window within the conventional bank. This window has been created to serve the needs of the Muslim community. This does not necessitate that every transaction in the bank itself is Sharī῾ah compliant. We hope this clears your doubts regarding Islamic finance within a conventional bank.
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