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Published in the 1-15 May 2004 print edition of MG; send me the print edition

“Islamic” fraud is back
New “al-Falah” on the prowl

While a sizable number of Muslim investors are still recuperating from the scars inflicted by Al-Falah brand of “Islamic” financial sharks, we now have another “al-” brand of companies claiming to be an associate of a multinational Islamic finance group. Unlike Al-Falah, this group has adopted another route for harassing poor Muslims.

The company is Al-Barr Finance House (formerly known as Al Baraka Finance House Limited) headquartered at Mumbai and branches in Andheri, Azamgarh, Aligarh, Bhiwandi, Chennai, New Delhi and Kanpur according to its website (http://www.abfhl.com/services%20index.htm). Its board of directors include luminaries like former RBI director A. Hasib and member of parliament Saleem Shervani.

Al-Barr’s modus operandi is that it would approach local traders with an option to finance their business in Islam-permitted methods. People are told they will get rid of the cumbersome and time-consuming procedures normally adopted in conventional finances. In the name of helping them “avoid” the blight of riba and reap Barakah here and in the Hereafter, victims ends up paying more than 50 percent interest in the disguise of “Islamically” permissible Murabahah. 

What is more disgusting and purely un-Islamic is that in return of the finance provided the company asks for post-dated cheques with amounts and dates unfilled, as a “security” for the finance facility. When asked the reason, they say that "this is just a formality". After that instead of providing a tradable commodity, which is a must for Murabahah to become Islamically permissible, the company simply hands over the cash or transfers the liquidity to your bank account.

Under the Islamic principle of loaning, it isa must for the lender to allow the borrower a reasonable time to return his dues if he is in trouble. What happens at this finance house is that after waiting for some time they will call you to inform that your arrest warrant from the head office has arrived, as you failed to return money including interest (Murabahah!) on time. Now you have the options either to pay all the dues immediately or go to the company’s headquarters, situated thousand miles away, to fight your case. Obviously the loanee will choose the former.

Under normal circumstances a company has a right to bring its defaulter to the court but what makes this matter different is that when a company calling itself “Islamic” finances its customers through money it cannot charge any thing over and above the principal of whatsoever time lapse may be. It can only charge more when it actually purchases an item needed by the borrower because in this way the company is engaged in trading instead of providing cash to the borrower. In this case all the risks associated with the purchased items remain with the company till the payment by the borrower is made in full.

Any security, including the post-dated cheques, cannot be recoursed to legal options unless this provision is mentioned in the agreement and a copy of the same is also provided to the borrower. Moreover, a borrower is also liable to be informed in advance of any such action of the financier. Unless these Islamic stipulations are kept in mind any unilateral action of bi-lateral trade will only be termed as harassment.

There is an urgent need to check the growing menace of pseudo-Islamic finance companies, whose quick buck psychosis has already done enough damage to the cause. Islamic economists and financial experts must ensure proper enforcement of Islamic values by all those who are claiming to be working on Islamic principles. Else the ilk of Al-Falah will continue looting and plundering the gullible in the name of Shariah-compliant schemes. 

— Shariq Nisar, AMU

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