A: Tax planning, inheritance planning, it's all part of B: Hi.

What can you tell me about your deposit

the wealth management program. accounts?
B: it sounds appealing. A: Well, our investment philosophy is based on the
A: How do you feel about the flat-fee payment? financial interests and security of our members.
B: I think it's reasonable. B: How do you determine your members' interests?
A: Our members have voting rights to address issues
regarding the institution's financial policies.
Answer Key 27

Teacher's book Banking

Book 3 Answer Key

B: Interesting. I've heard you offer better interest rates 3 1 c 3 E 5 D

than commercial banks. 2 A 4 F 6 B
A: We do. To strengthen funds in the mortgage
market the government allows us to offer slightly 4 1 loss 3 joint venture 5 prohibits
higher rates to our depositors. 2 bear 4 Usury 6 collateral
B: So, you use the money of your depositors to
make mortgage loans? 5 Suggested Answer
A: Yes. Seventy percent of our lending is for Businesses that violate Islamic values, for instance
mortgages on homes right here in Highwood. the pork and alcohol industries, may not invest in
B: Wow. So the money I invest would help the Islamic countries.
community.
A: Essentially yes. Your deposits would be like 6 D 2 D
investments in the community.
B: I see. Are the investments safe? 7 1 Getting ready for
A: Compared to other types of investing ours is very 2 a different ball game
secure. 3 Correct me if I'm wrong
4 How so
9 Suggested Answer 5 differently than we do
Here at Friendly S & L, our aim is to provide excellent 6 In what way
services for all of our members. This means offering 7 Instead of
excellent rates on deposits and using those to offer 8 profit sharing
mortgages to people in our local community. This
means that depositing with us is very safe, as you 8 Suggested Answer
are making a long-term investment in your local B: Hi Bill. Getting ready for your Middle East trip?
mortgage market. All our members are encouraged A: Yeah. I've been reading up on Islamic banking. it's
to use their voting rights to address issues of the going to be a different ball game over there.
institution's financial policies. B: Sounds like it. Correct me if I'm wrong , but interest
is forbidden, right?
Unit 3 A: Yeah. But you can still make a profit in banking.
B: How so?
1 Suggested Answers
A: Well, for one thing, they deal with mortgages
1 Islamic banking emphasizes the principle of profit differently than we do here.
sharing: the risks and rewards associated with B: Oh yeah? In what way?
investments are shared between the borrower A: Instead of lending money for interest, a bank just
and the lender. Interest is not charged on Islamic buys the property. Then it sells it to the buyer for
loans as this is prohibited by Islamic law. a higher price .
2 I think charging interest is unfair. The lender doesn't B: I see. I've also heard there's a lot of profit sharing .
do any work and gets a reward for this, while the A: Yep. That's the typical arrangement, profit sharing,
borrower must work hard to repay a loan and and loss sharing.
receives no reward.
OR 9 Suggested Answer
I don't think that charging interest is unfair. Anyone
Islamic banking is considerably different to banking
who loans out their money to someone else risks
in other cultures. For starters it is prohibited to charge
not getting some or all of it back, and so interest
interest on loans. Certain types of businesses, whose
is a fair compensation for this risk . In addition, by
activities are in violation of Islamic values, are also
lending money to someone a person is unable to
prohibited from investing in Islamic countries. Instead
make a profit from some other investment that
the focus is on profit sharing and joint ventures are
they might have otherwise undertaken (even just
common. With mortgages the bank simply buys the
putting the money into a savings account) and so,
property then it sells it to the buyer at a higher price.
again, deserves to be compensated for this.
Leasing and cost plus contracts are also acceptable
business arrangements.
2 1 F 2 T 3 F

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