Profit would have to come from an up front loan processing fee structure, and collateral liquidation of defaulted loans.
Otherwise, what incentive is there to be a bank?
Is that how the "halal" banks work? I know in some muslim circles, interest isn't allowed.
From UIF's FAQ page:
How is it different from a conventional transaction? A conventional bank issues you a loan of money to buy a house, and then charges interest on the loan. This is not permissible under Islam because it is clear interest. UIF offers an alternative financing model called Musharaka (Partnership). UIF buys the property with you and sells it’s ownership to you and you pay UIF a profit for using the property. There is no interest involved. UIF is simply buying and selling a house to you.
It's weird sounding, but at the same time, sounds much better than a mortgage. Reading it several times, it sounds like they are just playing word games.
IDK how halal banks are structured.
Profit has to come from somewhere to incentivize being a bank, beyond the cost of takng risk, employees, buildings, taxes, etc.
Halal banking may explain a part of why the ME region is relatively undeveloped, backward and without a vibrant middle class. Borrowers must be scrutinized more harshly?
No clue how they work. I read that they can now be found in the US, as there is demand for those types of products. Don't even know if "bank" is the correct term for them.