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Job In Trade Finance Banking As Compared To Corporate Banking
Trade is allowed but lending is not, as per our religion. In light of this concept I have only worked in Trade finance departments of major banks for last many years. However my growth potential is limited in trade finance. I have stayed away from Corporate Banking or any other sort of banking where we bring clients and offer them loans or pay them interest. Trade Finance on the other hand facilitates sale and purchase of goods and services. We also provide supply chain financing and earn discounting on invoices purchased by our bank. Should I look for more senior roles within my bank which will include raising deposits and paying interest to deposit holders and/or giving loans to corporations. Alternatively should I leave banking altogether and find another career? I am nearing 50 years of age and have many obligations.
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8 Replies
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Job In Trade Finance Banking As Compared To Corporate Banking
updated 2 months, 1 week ago
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Replies
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Banks conduct two types of transactions. The first is a personal loan, where the bank does not require the borrower to specify how the funds will be used. The interest charged on this type of loan is considered usury (Riba), which is prohibited in Islam. Therefore, facilitating personal loans with interest is not permissible.
The second type involves investment with the client. Although the bank may refer to this as a loan, it is, in fact, an investment. The bank only disburses funds once the client presents a justified business plan. In this case, the profit earned by the bank is not considered usury (Riba), and such transactions are allowed in Islam.
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Sir can you please refer to the source by Dr Ghamdi where he says such financing from bank, it’s employees and it’s owners point of view is allowed in Islam. I have copied my guiding link from his talk https://youtu.be/Go0FkYRsWog?si=o60MkP0rBnT_hKsU
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Thank you sir. I understand better. I do have one further technicality to focus on. We discussed the investments based on a clear plan presented by the customer. However, there are things that happen on regular basis in corporate banking such as 1) banks take deposits from Corporate clients and pay interest, 2) banks give overdraft facilities to corporate clients to provide short term general liquidity and charge interest3) banks provide general revolving loans for various tenors addresses to meet general corporate purpose requirements on interest. Please advise in the case of all these activities, a banker (who could be Muslim) is targeted to arrange deposits or arrange loans wherein the underlying purpose is “general” and not identifiable. In my understanding in reviewing Ghamdi Saheb, these activities are not Shariah compliant. Please advise
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1. there are two opinions. Some consider the amount deposited by the client as a loan, in that case, the profit a bank pays is usury. The second opinion suggests that the client invests with the bank based on principle secured investment, in this case, the profit it generates is profit, not usury. you can make your choice here.
2. I do not understand it well technically. However, the principle is, that if it is a loan, the internet is usury.
3. I am not sure about the nature of this transaction, whether it is an investment made by the bank or simply a loan and the bank has no concern about how the money is used.
@UmerQureshi saheb might help here.
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Please refer to the videos of Ghamidi Sahab in the following thread:
In the light of the current Banking Activities, Ghamidi Sahab does not consider working in a Bank in any capacity as outright “Haram”. It is discouraged according to him and a person may seek a better job if he wants to achieve more piety, but it is not Haram.
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1) Deposits are mostly considered loan by conventional banks and payments are categorized as an Interest. Islamic banks however treat such deposits as financing/investment and profits are distributed accordingly. It must be kept in mind that payment of interest is not outright Haram, it is consumption/earning of interest which is Haram.
2 & 3) The same principle applies to the overdraft and revolving loans, they are considered loans in conventional banking and interest is charged on them. If a loan is issued, then a bank can only take late payment surcharge from the borrower (like in a credit card) but cannot charge interest. Otherwise, a bank should enter into a financing agreement, which should be principal secured and profit ratio determined on the basis of actual figures or on an estimated figure. This financing arrangement can be either short-term or a long-term, depending on the requirements of a company/client.
Please also refer to the following comments of Ghamidi Sahab from 1:18:35 to 1:21:26
https://www.youtube.com/live/LUbg3QpPfRM?si=d0-0r_fh9sBiUXCu&t=4715
ask.ghamidi.org
Working For Finance Company Remotely Which Is Operates In Europe - Ask Ghamidi
ASSALAM O ALLAIKUM I am concerned in light of Hadith 4093 sahih muslim volume 4-I am based in Pakistan and I provide services remotely to a company which
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Dear both. I have carefully reviewed responses by both. They are concise and well thought out. Thank you very much for taking time, doing your research and responding to me. Barik Allah Feekum.
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