| Subject: | Re: [socialcredit] Usury? | | Date: | Thursday, June 2, 2005 14:18:18 (+1200) | | From: | W. McGunnigle <wmcgunn @.........nz>
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Replying to William B. Ryan
The mechanism whereby MuslimBanks share the
risk derives from Sharia law.
A Western Bank on default of a loan can put someone into
receivership and decide if they will allow the enterprise to " trade its way
out of trouble" or declare it bankrupt. If the latter course is adopted then
the bank gets first claim on the enterprise's assets to clear off the loan
and then the remaining creditors share out whatever is left.
Under Muslim law the bank can do precisely the same, BUT the bank
does not get first claim to clear off the outstanding loan. It takes its
chances equally on the share out with all other creditors in proportion to
the debts incurred by that enterprise to those creditors.
My Brother who worked among the Muslims in the Middle east for many
years explained this to me some years ago. He also stated that Muslim banks
tended to be more reluctant than western banks to lend money to dubious
enterprises and to place companies into receivership.
Under this system the bank is almost certain to make a substancial loss
if it places a company into the bankrupcy court in event of a company
becoming insolvent unlike western banks that can often salvage its entire
loan at the expenseof other creditors.
Interest rates are higher because of this modification to western
practices. The loan has risks attached to it that western banks by law do
not.
However I too question the business practices of the Muslim banking
system. Whether this can be construed as a threat to western banks is a moot
point. Hearsay suggests that there is one rule for Muslims using a Muslim
bank and a different rule for nonMuslims. Proving it is so, is a very
different "Kettle of Fish". On this point I agree with Bill Ryan
William McGunnigle
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