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BISMILLAH ARRAHMAN ARRAHEEM

BAAD AZ SALAM BER MUHAMMAD SALLALLAHO ALAIHI WASSALLAM WAL ANBIYAE KARAAM, WAL AHLALBAIT, WAL ASHABIHI, WAL OLIYAEY KARAM

Alternate System to RIBA (Referred Valued Loan RVL)

This system is basically based on a simple idea, that the value of a loan may be based with reference to the value of any valuable or rare article like Gold, Silver, Foreign currencies, Shares of any renowned and stable company, rare metals e.t.c. In the current banking system, the rate of “profit” is predetermined and loans are settled on the basis of this already fixed rate. This is the Riba in its real sense, which is strongly prohibited in Islam. Because earning through Interest has no production at its backing and just “Currency Wealth” is accumulated in the hands of Riba takers without any output or production against it. We have observed in the capitalism system, that all the wealth is concentrated in the hands of a minor % of the whole economy and this concentration of wealth in few hands is the cause of current crisis and distress in all capitalist countries. Our great thinker Dr Allama Iqbal felt and depicted in his poetry the evils of this system, almost a century ago, and according to his words the Capitalism will commit a suicide and this process has started in the shape of socialist’s success in the cultural heart of the Europe i.e, France. Now I would like to share some of the features and brief mechanism of this system:

Constitution of RVL Centres

First phase is the constitution of the RVL centers to stand against the Interest based banking system. These centers would pool the investment and give the loans and credits, which are the basis of business and commerce in every economy, just in the same manner and mechanism as the normal banking system channels the funds, with the basic difference of using the “Referred Value Mechanism” instead of “Interest Rate” usage. These centers will use the same methods for recovery of loans from the debtors, as the normal banks do and same series of activities may be performed as practiced by the banks, but with the sole exclusion of Riba/Interest.

Ascertainment of Articles to be used for valuation

Second step is to determine what article should be used for what amount range of a loan/credit. For example, for nominal amounts let say credits up to Rs.100,000, the market values of even some common metals like steel, copper or grains or food items may be used. For medium sized loans say up to Rs. 1000,000, the market values of Precious metals like Silver, Gold or Uranium may be used. For super loans/credits the values of items like market values of any established company’s shares or land values of any predetermined unit of possession in any particular locality may be used.

The Rating Mechanism

At this stage the method of determination of loan or credit value at the time of its acquisition or payment. First the value of the loan or credit would be depicted in terms of units at the time of its acquisition or creation, which are calculated, as follows:

Amount of Loan or credit Units of Loan =    		______________________ Market value of the Article at the time of acquisition/creation

For example, let say the amount of a loan of Rs 100,000 is to be determined on the basis of the current market value of Silver which is Rs 1000 per tola (The common unit for market value of silver is Tola), will be as follows:

100,000 Units of loans	=	_______	=  100 Units

1000

At the time of payments or writing off the loans or credits, the particular payment or write off will be turned in to units of loans or credits as follows:

Amount of payment or to be written off Units of loans to be written off	=	_______________________________ Market value of the Article at the time of acquisition/creation For example, furthering to the example given before, the payment of Rs, 50,000, at the time when per tola price of Silver is Rs 2000, the units to be written off will be:

50,000 Units to be written off		=	______	=	25

2,000

And the units of loan or credit remaining will be:

Original Units Less Units written off.

So in the example given before, the remaining units will be 75 Units (100-25). The determination of market value of the article is a subjective issue and standard market rates of any particular articles may be used for calculations mentioned above, which should be clearly made understood to the clients.

The Safety Measures

The same methods or techniques may be used to secure the payments and redemption of the funds may be used as normally used by banking and insurance or investment companies. The personal and business data and documents like ID cards, Domocile, NTN and SRN in case of businessmen, passport e.t.c may be verified and copies thereof may be used for reference data. The personal guarantees and collateral securities like Jewellery, Land Mortgages may be used to secure the payments.

I hope that this detailed description would attach your attention and consideration. I understand that many practical complexities and factors are to be considered before application of this system, but I am hopeful that you would convey my this suggestion to your financial and accounting experts, who can turn this theory into a practical framework.

May Allah bless us in the form of Halal source of investment and get us rid of the damned evil of Riba.

WASSALAAM

FROM KHURRAM MUSTANSIR SIDDIQUI TITLE: MUHAMMAD ZALQARNAIN UMMATI 80-A NAWAB TOWN NEAR BEACON HOUSE SCHOOL, RAIWIND RD LHR

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