Answer: Islamic banks should ideally have their own benchmark system
for determination of profit. Since, the industry is in its initial stage of
development, it is using the available benchmark for the banking industry. It
is expected that once it is grown to a sizable level, it would have its own
benchmark. However, using Interest
Rate benchmark for determining the profit of any permissible
transaction does not render the transaction as invalid or haram. It is the
nature/mechanism of the transaction that determines its validity or otherwise.
For example Mr. A and Mr. B are two neighbors. Mr. A sells liquor
which is totally prohibited in Islam whereas Mr. B, being a practicing Muslim
dislikes the business of Mr. A and starts the business of soft drinks. Mr. B wants his business
to earn as much profit as Mr. A earns through trading in liquor. Therefore he
decides that he will charge the same rate of profit from his customers as Mr. A
charges over the sale of liquor. Thus he has tied up his rate of profit with
the rate used by Mr. A in his prohibited business.
One may say that Mr. B uses an undesirable benchmark in determining
the rate of profit, but obviously no one can say that the profit charged by him
is haram because he has used the rate of profit of the business of liquor only
as a benchmark.
The same is true for Islamic banks, it is most desirable and preferable
those Islamic banks develop their own benchmark however; in the absence of any
such alternative, interest rate related benchmark can be used.
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