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|Topic: Islamic Banking In Australia|
Joined: 17 March 2014
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| Topic: Islamic Banking In Australia
Posted: 17 March 2014 at 4:17am
There has been a recent buzz in Australia and around the world about the growth, potential, and prospects of the Islamic Banking and Finance Industry. Although this industry is growing rapidly Dubai, Malaysia and the UK, it is just beginning to catch-on in Australia. One of the oldest 'Islamic banking' institutions in Australia is MCCA.
There has been much debate on whether or not MCCA is actually a Halal, Sharia compliant, Financial Institution. most scholars have commented on whether or not their investment contracts are in accordance with Sharia principles. However, i would like to look at their operations from a different angle. Before i go any further, I'd like to clarify that i am not a scholar stating whether or not you should finance your house through MCCA. I have a background in accounting which i will use in the following analysis.
I believe that the key question that is often overlooked when assessing MCCA's Sharia compliance is: Where do they fund their loans and mortgages from? (Where do they get the money that they lend out to you). Some naive people believe that they raise these funds from the money that clients invest with them under their cash management scheme. This is only partially true. By referring to their financial statements provided in their official annual report, we find that their cash management scheme only has $20-30M in it. In the same financial reports, MCCA state that the amount that they have loaned out to clients is $750M. The obvious question is? where did they get the money to finance all these loans. The answer: From a conventional, Un-Islamic bank (Commonwealth Bank). An example of how this works: MCCA borrow the funds from the bank at 4% interest and then lend those same funds to their Muslim clients at a fixed interest rate of 6%. When the client pays back their loan to MCCA, MCCA pocket 2% and pay back the remaining 4% to the bank from which they borrowed the original funds.
From the way i see it, this is not "Islamic Finance". All MCCA is doing is acting as a large mortgage broker and marketing themselves to simple Muslims, selling them the 'Aussie Dream' of owning their own home in a so-called Islamic manner.
The reason for me writing this post is not to insight hate towards MCCA but to clarify for the average Muslim the truth about such fraudulent schemes. Schemes that stain Islam, its values, ethics and practices.
Please comment and share with others.
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