On Thu, 27 Feb 2003, Max B. Sawicky wrote:
> I thought Islamic finance entailed selling notes at a discount, on the
> pretext that the repayments were not the same as interest.
Discounting notes is dealing in interest, no way around that.
I think what you're remembering is that they disguise it as a sale -- you give me the goods now, I give you an agreed upon amount of money at an agreed upon date later, and there's no way to say what portion of that money is trade credit interest -- or they structure the loan as a fictitious sale and buyback, a la Enron. These were also the most popular way to structure loans among Christians in the early middle ages.
But the righteous way to do Islamic finance is to take equity stakes. That's apparently what Allah wants lenders to do -- to take hits in the bad times and get part of the profits in the good. What he frowns on is bankers who demand the same pound of dates even when times are bad.
In Christian terms, this corresponds pretty exactly to the commenda structure for financing voyages that was the first innovation to pass the censors and get the merchant capitalist ball rolling.
Partnerships also pass muster under both systems.
Michael