The Art of Islamic Banking and Finance: Tools and Techniques for Community-Based Banking by Yahia Abdul-Rahman

CHAPTER 1
Introduction
This book is for all people of all faiths. Many may think that Islamic
banking is for the Muslims only and that Islamic banking is a gateway to
the significant wealth amassed by the oil-producing countries in the Gulf.
That is not true! And that is why I am writing this book.
This book is about riba/ribit-free banking, or RF banking, a new brand of
banking and finance service. It can be identified as a faith-based, socially
responsible approach to banking. It is a service that aspires to serve all
people of all faiths and backgrounds. It is believed that there is great
demand for RF banking in the United States and the West, as well as in
many developing nations worldwide. RF banking is a system that is not
built on renting money at a price called the interest rate, but on renting a
tangible asset, such as homes, tools and equipment, and businesses.
In the year 2001, we at LARIBA (www.lariba.com), and later (since July
2003) at the Bank of Whittier, NA (www.BankOfWhittier.com) started a
dedicated effort to brand Islamic banking with a new name: riba-free, or RF,
banking to describe what this new brand of banking and finance really is.
The effort we invested has paid off, and the riba-free description is now
used globally. It is slowly replacing the name “Islamic” banking. After
living for more than 40 years in the United States, we came to understand
the sensitivities of many in the country toward mixing state and church
matters. In the United States, there is a deep-seated belief that the state and
church must be separated. The U.S. system of separating church and state
implies that a church is not permitted to run the state and, by the same
token, the state cannot interfere in and run the affairs of a church. This way,
churches (and other places of worship) can keep their independence and
focus on producing spiritually, ethically, and morally qualified men and
women to send to the state in order to run it.
The name we have advocated and are promoting is riba-free. It starts with
the word riba, a sister-word to the term ribit used in the Old Testament.
Riba means the act of taking advantage of those who need money to meet
their basic necessities through the act of renting them money at a price
called “interest.” RF banking is a brand of banking that is socially
responsible and is community-based in both spirit and intent. This brand of
banking is the manifestation of Judeo-Christian-Islamic values, which are
deepening in America. RF banking and finance is a new way of living
without having to carry the burden of an ever-accumulating debt through
the unnecessary overuse of loans (such as, for example, the use of credit
cards to borrow, home equity lines of credit, and loans of all other types;
secured and unsecured).
RF banking pays close attention as to whom and what to finance. RF
banks do not, for example, finance alcohol- and gambling-related
businesses, such as liquor stores or gambling casinos. It also does not
finance environmentally irresponsible companies and businesses that are
not fair to their employees. It is believed that RF banking will bring back to
the United States and the world the characteristics of the banking movement
that built America, as dramatized by the famous Hollywood actor Jimmy
Stewart in the movie It’s a Wonderful Life. I believe that Jimmy Stewart
was the first American to present, in this movie, the real character of an RF
banker. Based on actual operating experience, our customers of all sorts of
religious beliefs including people of Hindu, Buddhist, Judaic, Christian, and
Muslim faiths, appreciate and love to use the concepts of RF banking. Their
consistent feedback is “ . . . we have not heard other bankers operate like
this before. . . . we feel that you care about us as members of your family.”
Escrow company officers love the way we serve people and our approach to
financing. It is interesting to note that a few escrow company employees,
after reviewing our closing documents for their customers, voluntarily
called us to finance their homes with us. It is important to note that RF
banking is cost-competitive with conventional riba-based banks.
The modern Islamic banking movement started in a humble way as a
small community finance effort in Egypt (1963) and grew gradually to
become a small emerging finance industry in the Middle East (1973).
Today, with the increase in demand for oil and gas and the increase in

The Art of Islamic Banking and Finance: Tools and Techniques for Community-Based Banking by Yahia Abdul-Rahman