Riba-Free ( Islamic )Banking and Finance A New Life style For 21 st Century

1. Riba-Free (Islamic)Banking and FinanceA New Life style For 21st Century The Art of Islamic Banking and Finance in AmericaDr. Yahia Abdul-Rahman YARAHMAN@WhittierBank.com +1-626-818-0855 Founder of :The LARIBA System - Since 1987 www.LARIBA.com ; www.WhittierBank.com Islam and Economy Symposium Sabahattin Zaim University Istanbul, Turkeya - December 10th , 2011

2. 1997 ANNUAL RECOGNITION AWARD FOR EXCELLENCE AND SIGNIFICANT CONTRIBUTIONS IN:L.A.R.I.B.A. BANKING AND FINANCE Prof. Sabahattin Zaim Dean of the Economics Department,Sakarya University, Turkey, 1997

3. Another Banking and Finance Discipline RFBanking and Finance RFRiba-Free Ribit-Free Responsible Finance

4. RF Banking Since 1987 - Our Motivation Open A Window for Interfaith Peace, Mutual Respect and Harmony Through RF Finance • Build Communities by Serving All People of All Faiths • Empower All to Own a Car, a Home and a Business to Benefit from and Integrate in the American Life Style by Using the RF Financing DISCIPLINE • Do Not Run After “Oil Money.” We Put Our Money Where Our Mouth Is! All Our Money is from US Community.

5. RF BankingWhat is in a Name? Communicate using Language of the People – ENGLISH! • Riba: Known but not Universally Understood by All Muslims. It is usually mistranslated as Interest. It is SAME AS Ribitin the Old and New Testaments but Almost Unknown to Many. We call it: RF Banking (Riba/Ribit-Free) • Usury:Paying a Rent for the Use of Money by Original Catholic Church. Relaxed Later to Mean Excessive Interest We Consider Both to be Riba

6. RF BankingWhat is in a Name? Communicate using Language of the People – ENGLISH! Be Sensitive! • Shari’aa (Canon): Understood in Majority Muslim Countries but NOT in the West, How About It’s Meaning in the Language of the Land: the Judeo-Christian-Islamic Discipline. • Islamic Banking: Is it Only for Muslims? May Be Acceptable in Muslim Lands and Some Non-Muslim Lands (Expediency??) What Happens if Citibank or Goldman Sacks are Renamed The Christian or Jewish Bank of America? We call it what it really is: RF BankingBe sensitive

7. Riba/Ribit-Free RF Life Style in AmericaAre You Trying to Change The Seating Arrangements on the Titanic? • Our Approach: • Seek Permission of the Captain to Rearrange a Small Space and Obey the Rules. • If We Prove that Our Approach is Good and Offers An Added Value, Others will Follow.

8. RF Banking – It Is A Dscipline!Articulating our Judeo-Christian-Islamic Value System • Riba/Ribit Is Prohibited by All Faiths – Specially the in Judeo-Christian-Islamic Value System. It is prohibited in Buddhism and Hinduism. It is for All People and NOT Exclusive to Muslims. • We Do Not Rent Money(which is Riba/Ribit). We invest with and in People. WE RESPECT MONEY • Credit is a Human Right - We Serve All People Regardless of Faith, Color, National Origin, Gender, Social Status, Language, Age or Marital Status. • We Do Not Discriminatewhile Recruiting or Serving the Community. We Treat All Fairly Customers, Staff and Shareholders.

9. RF BankingArticulating our Value System (contd.) • We Offer the Added Valueof Making Certain It is a Prudent Investment. The new Macro: Commodity Indexation and Micro: Marking to Market RF Disciplines • We Commit to Circulate Community Deposits Back in the Communityto Generate Economic Prosperity, Job Opportunities and Social Peace. • We Do Not: Speculate, “Sell or Buy” Loans, Broker “Loans” & “Deposits” or “Sell” Loan Servicing.

10. Published by John Wiley & Sons Intl. Published January 2010 Chapter 2 • The Prohibition of Riba/Ribit/ Usury in The Judeo-Christian-Islamic Value System

11. The Prohibition of Ribit(Old/New Testament) or Riba (the Qur’aan) • The Original Jewish Teachings: A Person of the Jewish Faith who Participates in Ribit Cannot Stand as a Witness in a Jewish court . • The Old Catholic Teachings : A Person Who Deals in Ribit is Denied a Catholic Burial . • The Qur’aan : Charging of Ribit / Riba is one of the Most Severe Offenses Against God, His Prophets and all of God’s creations - Gharar

12. Published by John Wiley & Sons Intl. Published January 2010 Chapter 3 First Time in Ribit/Riba Free (Islamic) Finance • Money and The Rules of: • Commodity Indexation An Approach to Monetary Valuations Macro Analysis • Marking To the Market Micro Analysis

13. Fair Pricing and Prudent InvestingApplying RF Rules Financing Homes and Commercial ActivitiesMarking-To-Market Rule In Trading or in Buy/Sell Agreement, the Item Involved has to beMarked-to-Market : To Keep Market Equilibrium and to Ascertain that the Investment is Prudent , Not Speculative and is Free of Deception (Gharar) How To Mark-To-Market?:Prudent Investing House: Market Rental Value Commercial Building: Lease Rate Commodities: As per Other Commodity Franchise Services: Fair Market Value and Rate, Services: Market Rate of A Similar Service

14. Back To The Future! RIBA-FREE BANKINGLiving The Real Riba-Free Life Style What is Money? • Store of Value: Gold & Silver • Store of Strategic Stocks : Food Staples • Medium of Exchange (Measuring Device):Fiat(Paper)

15. Prohibition of Ribit/Riba:Financing Business and Commercial ActivitiesCommodity Indexation Rule الذهب بالذهب و الفضة بالفضة و البر بالبر و الملح بالملح مثلا بمثل يدا بيد ، فمن زاد أو استزاد فقد أربى ، الآخذ و المعطى سواء (أحمد و البخارى) Use of Reference Commodities to Price Things in the Market: • Precious Metals:Gold & Silver • Basic Food staples: Wheat, Barley, Dates and Salt When Dealing in Terms of Reference Commodities • No Increase Due to Non-Payment in Time or Time Value of Debt • No Increase /Same Commodity

16. History and The Broken Monetary System: The Dollar Made As Good As Gold • After WWII – Bretton Woods Agreement: • Gold at $35 per Ounce (Gold Window) • International Monetary Fund, IMF • World Bank • World Trade Agreement

17. Prices!Paper (fiat) Money and Gold President Nixon – 8/1971 Closes The Gold Window – Gold $35/Oz • Gold $/Oz: 1971 = $352011=$1700 48X • Oil Price Per barrel: 1971 = $2.20 2011=$100 - $110 48X

18. Applying RF Commodity Indexation RuleAvg. Home Price in US in US$

19. Early Warning For Price Bubbles Applying RF Rules Home Prices in Ounces of Gold Source: LARIBA Research Center

20. COMMODITY INDEXATION RULEPrice of Oil in US$

21. Early Warning For Price Bubbles COMMODITY INDEXATION RULEPrice of Gold in Terms of OilAn Average of 14 Barrels/Oz Gold

22. Early Warning For Price BubblesCOMMODITY INDEXATION RULEPrice of Wheat in Gold

23. COMMODITY INDEXATION Rice in terms of US$

24. COMMODITY INDEXATION Rice in terms of US$, Gold

25. COMMODITY INDEXATION Rice in terms of US$, Gold and Wheat

26. Early Warning For Price Bubbles Applying RF Commodity Indexation RulePricing of S&P 500 in Terms of Gold

27. Early Warning For Price Bubbles Applying RF Rules COMMODITY INDEXATION RULEPrice of Natural Gas in Terms of Gold

28. Early Warning For Price Bubbles Applying RF Rules Financing Homes and Commercial ActivitiesMarking-To-Market Rule • The RF Banker is Trained to Think as An Investor and Not As Person Who “Sells” Loan in Order to Rent Money. • Each Financing Deal is Evaluated By the RF Banker Based on The Market Value of the Utility of The Item Financed

29. Published by John Wiley & Sons Intl. Published January 2010 Chapter 6 • Civility & Social Responsibility • ECONOMY and ISLAM

30. ECONOMY & ISLAMElements of the RF (Riba Free) Economic System • 1. Production • Every individual must work and produce, • Products to be useful and not harmful as defined in the Law (Shari’aa.)

31. ECONOMY & ISLAMElements of the RF (Riba Free) Economic System • 2. Distribution • God/Allah owns wealth, power and natural resources. • The individual or the institution is appointed by God as a trustee and custodian to manage them. • Every being, human or not, has a minimum requirement to be able to live in dignity. This should be provided by government institutions to anyone who cannot meet his or her own needs. • Private property and ownership are sacred rights and must be protected. • The system is paid back and balanced out through the act of ritual Alms giving (Zakah) as one of the pillars of the Judeo-Christian-Islamic Law (Shari’aa) and System. .

32. ECONOMY & ISLAMElements of the RF (Riba Free) Economic System • 2. Distribution (contd.) • Government is responsible for the basic needs of every citizen. These are food, shelter, clothing, education, health care & infrastructure. • The Only Road to Richness is Hard Work and the Assumption of Risk NOT gambling, fraud and speculation. • The Law (Shari’aa) defines exactly how the estate is distributed after death (in a detailed description in the Qur'aan.) The Qur’aan; Chapter 4, Nissaa – Women.

33. ECONOMY & ISLAMElements of the RF (Riba Free) Economic System • 2. Distribution (contd.) Miraath – Inheritance • A Will cannot Alter the predefined distribution rates as revealed by God/Allah in the Qur’aan (Chapter 4.) • This way money is distributed fairly and is trickled down Through the system.

34. ECONOMY & ISLAMElements of the RF (Riba Free) Economic System • 3. Consumption: • Citizen should be trained to seek a life of moderation and a balanced pattern of consumption. Over-consumption is condemned as the work of Satan. • System Prohibits: bribery, illegal profits, abusing the legal system and/or reckless spending and extravagant over-consumption. • Everyone is trained to plan for the future and to be careful. The story of Prophet Joseph

35. THE IDEAL SOCIETYThe New World Order of RF Banking” An order, which shapes a new society • Built on intellectual & mental persuasion. Our mind is the key to knowing God/Allah and live by the Islamic values. • Believes in the purity of the soul and body. • Bans drugs, alcohol and gambling. • Looks at promiscuous activities as filth that should never be condoned. • Believes in respecting and fulfilling promises. • Believes in volunteering oneself and ones resources to the cause of serving God/Allah.

36. THE IDEAL SOCIETYThe New World Order of RF Banking” An order, which shapes a new society • Believes in respecting peoples’ properties, dignity and right to live honorably and freely. • Never allows individuals to be overburdened with liabilities and debts that cannot be fulfilled. • Never hoards and never uses Riba in its financial dealings. • Believes that these goals can be achieved not through the proletariat of communism and socialism or the selfishness and greed of money changers in untamed version of capitalism.

37. Government, Business and Citizen’s Responsibilities in The Ideal Society • Protection of property rights and title of ownership • Abolishment of discrimination and tribalism. • Enforcement of equal rights and opportunities regardless of tribal connections, race, national origin, gender, power, richness and/or poverty. • WOMEN: • Recognition of women as equal to men in a united community. • System looking at women as important contributors to society and that they are entitled to inherit and own property (for the first time in history).

38. Government, Business and Citizen’s Responsibilities in The Ideal Society • Enforcing the free market system which was later popularized in the West by Adam Smith. • Origination of the concept of Takaful : Mutual Benefit & Protection (today’s insurance.) • Origination of labor rights stipulating fairness to labor (pronounced by Prophet Muhammad pp.) • Strict enforcement of full transparency.

39. Government, Business and Citizen’s Responsibilities in The Ideal Society • Prohibition of Gharar including hoarding (Ihtikar), deception, misrepresentation of facts about products and services, fraud, cheating, deception and forgery. • Enforcing Basic Belief that MONEY: • Is not a commodity that can be “bought”, “sold’ and/or “rented” at a price called interest rate. • Only grows when invested in back to create Jobs, economic growth and prosperity.

40. Government, Business and Citizen’s Responsibilities in The Ideal Society Establishment of the ISLAMIC ECONOMIC (Judeo-Christian-Islamic), Finance and Monetary System which is based on 4 important pillars 1. Wealth and property (assets) are owned by God's. Man (male/female) is appointed by God in His mysterious and wise ways as its trustees and custodians. 2. The system of RF Banking and finance. 3. The system of "Zakah" or "alms" giving. 4. The system of "Miraath" or inheritance.

41. Government, Business and Citizen’s Responsibilities in The Ideal Society • Establishment of a standard for Behavior and Unique Life Style. It calls for: • Followers to live below or within one’s means: • Followers not to waste, not to live in an extravagant life style and not to over spend. Overspending is defined by the Judeo-Christian-Islamic value system as the work of Satan

42. RF Values The Spirit of RF Banking • SUCCESS: • The progressive realization of a worthy ideal • Expressed in both material achievements and in being virtuous. • Virtue implies a positive attitude towards life, other citizens in the community and the world and all other beings. • The results are peace of mind, contentment and a sense of security.

43. RF Values The Spirit of RF Banking • Time Horizon – UNLIMITED • Extends beyond this life to the life after death; the hereafter. • When one dies he/she will be remembered by what they leave behind; his/her perpetual source of Benefit, his/her family and descendants who perpetuate goodness by following the laws of God, and/or a permanent contribution which will benefit the community Hadeeth of Prophet Muhammad (pp.)

44. RF Values The Spirit of RF Banking • Education and Productive Work: • Respect and Value hard work and its tangible contributions in terms of quality, creativity and service. • The RF Banker Stands on Two Pillars: • The pillar of faith-based moral, ethical and spiritual fulfillment, and • The pillar of excellence in the quality of products and services offered compared to its peer conventional riba-based banks

45. RF Values The Spirit of RF BankingGoals of Business 1. Maximization of profits and services in a legal and fair way to realize a better life and living standards with freedom and independence of the individual without any discrimination. 2. Adherence to free markets and free international trade as the natural mechanism of getting people to know each other in order to promote mutual respect, peace and prosperity through communications, trading and mutual benefits.

46. The Covenants of RF BankingThe 10 Golden Promises of RF Bankers 1. Do Not Speculate With People's Money &Trust. 2. Fulfill Our Promises 3. Respect Money - Money "Respects" People Who Respect It 4. Do Not Forget Our Moral Responsibility To Local Communities. 5. Do Not Discriminate.

47. The Covenants of RF BankingThe 10 Golden Promises of RF Bankers 6. Invest In Our Clients. We DO NOT Rent Money! 7. BeSocially Responsible. 8. Be Sensitive about Who We Deal With 9. Be Conservative. 10. Look At Our Co-Workers As Our Partners.

48. Published by John Wiley & Sons Intl. Published January 2010 Other Chapters: 7– Conventional Riba/Ribit-Based Banking • 8- The Difference? • 9- Islamic Banking in 20th Century • 10- RF Banking in 21st Century • 11 & 12- Starting and Operating an RF Bank in US • 13- Case Studies: Financing a Car, a Home, Trusts (Waqf) and Investing in Stocks • 14- Vision of the Future

49. Back To The Future! The RF BANKING Brand The Universal Judeo-Christian-Islamic based Banking The RF Banking Brand (and Discipline): • Simple, • Based on the Judeo-Christian-Islamic Laws (Shari’aa) for a Riba/Ribit-Free Life-style, • It is Prudent Because it Applies the Rules of Commodity Indexationand Marking-to-Market • DESIGNED TO SERVE ALL PEOPLE OF ALL FAITHS.

50. Published by John Wiley & Sons Intl. Published January 2010