ECONOMICS: interest, profit, Muslims

From: scerir (
Date: Thu May 17 2001 - 15:12:12 MDT


There are about 1.3 billion Muslims in the world.

Their participation in the world's capital markets
has been hindered because of Islamic laws
prohibiting the taking of interest and trading merely
for the sake of making money; an investment must
have an underlying asset.

But the Amana Income Fund
invests according to Islamic laws.

And now
tells world's Muslim population how it can invest.


The Shari'ah Law (terms, interpretations)

"Murabahah" refers to a particular kind of sale where a seller
agrees with a buyer to provide a certain amount of profit relative
to an initial cost. Everything is disclosed, including the original
costs and the profit, which can be a lump sum or percentage.

"Musharakah" is an Arabic word meaning "to share."
It's used in business and trade so partners share the profit
or loss of a venture. Because interest is prohibited in Islamic law,
if a debtor suffers a loss, the creditor can't claim a fixed rate of return
or earn a high rate of profit.

Shari'ah experts have come up with a "five percent rule" that deems
"tolerable" investments in companies that have a maximum level
of five percent of non-Shari'ah compliant activities or "tainted income
sources." (Tainted income sources include financial institutions that
make or pay interest and companies that have any association with
pork products.)

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