Thursday, August 18, 2005

Interest Free Deposits Via Fatwas

Here is a business plan for you: open a bank in an area where the majority of the customer base will refuse to accept/receive interest payments on their savings accounts. Sound too good to be true, take a look at this:

Interest Free

Per the Arab News, bank customers in Arab countries usually refuse to receive interest payments on their accounts:

A friend once told me that when she opened an account, the clerk at the women’s section asked her this very question. As it was my friends’ first experience in banking, she looked vaguely at the bank clerk, wondering what the question meant and what her answer should be. Her confusion, however, did not last long since the clerk quickly said, “Most people refuse to take interest since they believe it is haram.” Predictably of course, my friend refused to take the interest, just as many others before her have done. And this is the way people abandon their interest to the bank instead of troubling themselves with money that is “haram.”

Now you would have a very low to zero demand for loans because of the interest associated with a loan, so your business plan would need two stages. Stage one is the banking network that focuses on deposits only in areas where the interest would be refused. Stage two would be another network of banks that focused more on lending but deposit based accounts as well, in location where interest is not considered “haram”. A high growth market where lots of money is needed, like say China.....................

A deposit base interest free, turned into loans at current market rates would equal one sweet ROI………………………………..