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04:42 the bank presents the work as the distributor, while the client presents the capital.
04:47 Both sides share the profits that will be generated from the investment.
04:54 Therefore, when the client goes to the bank and signs the credit opening, which is of course
04:59 the name of the distributor contract in Islamic transactions, the ratio of the distribution of profits
05:04 between him and the bank is determined.
05:06 Of course, this ratio differs by the bank and by the nature or type of account.
05:12 It can be 50-50, or 40-60, or 80-20. We can talk about this in detail.
05:22 It depends on the conditions, but usually it is 20-80.
05:29 There are other banks that do it 50-50, because they say that the bank gives a part of its profit
05:46 to the clients, who are the owners of the money, to ensure the stability of the distributed profits
05:54 and therefore, the bank keeps the clients' stability. So, when it is 50-50, the bank has
06:01 the advantage of being able to control the distribution ratio, unlike when it is 20-80.
06:07 I would like you to remind the viewers that we must mention the losses in the contract
06:15 and how the losses are on the owner of the money, and the distributor loses his efforts.
06:25 Okay. So, we say that in the terms of the account, it is written in the contract
06:32 in Islamic transactions, the distribution of profits, the distribution ratio is agreed upon,
06:37 and we say that it differs by the nature or type of account.
06:40 As for the losses, each party bears what it has provided.
06:45 Usually, people say that the client bears the losses, but this is a bit of a short-sighted understanding.
06:51 Both parties bear losses, but let's see what each party offers.
06:55 The client offers money, so his loss is on the money he has provided.
07:00 As for the bank, the distributor, the owner of the work, he offers work,
07:04 he has investments, he has the salaries he pays for the investment,
07:09 he has the credit and the salaries, and yet he loses all the expenses and costs
07:14 in exchange for any loss. So, each party loses from the type of what he has provided.
07:20 Okay, does the client just tell the bank, "I lost my money, that's it"?
07:25 No, of course not. What did the legal standard say?
07:28 The legal standard said that the distributor has a credit, so he does not guarantee the money.
07:35 He guarantees the money in the case of a breach or a default, or a violation of the conditions.
07:41 You are right.
07:42 The reason I am saying this is because, unfortunately, some banks or financial institutions
07:50 ask people to deposit their money through the distributor,
07:54 and they tell him that the capital is guaranteed, and the profit is guaranteed.
08:00 Many people ask about this treatment, and without a doubt, as you have mentioned,
08:06 this treatment is not correct. The capital cannot be guaranteed,
08:12 and the distributor cannot bear the losses of the money.
08:18 The question here, Dr. Al-Ana, is how to distribute the profits, and the competition is still on.
08:27 It seems that the standards have stated that there must be a settlement,
08:33 or a rectification of the juridical definition.
08:38 The capital must be rectified in order to distribute.
08:45 Great. Let's separate these two things.
08:48 We are talking about the standard of the distributor as one of the tools of Islamic financing.
08:53 We want to separate between the distributor and the company we are working with.
08:57 When we work with companies directly, or in direct activity,
09:02 this distributor has a specific method of distribution.
09:05 When we work with a bank, the situation is different.
09:08 Financial institutions such as banks have a slightly different situation.
09:12 They have a simple method of distribution, and it is easy for them to rectify the situation.
09:18 But what happens is that the standards state that in order to distribute the profits,
09:23 the competition must be settled and rectified.
09:26 What does rectification mean?
09:29 It is the transformation of the existing assets or the assets that we have,
09:34 that we have worked on, into money.
09:37 This is the idea of rectification, that we have finished the business or the activity we have worked on,
09:43 and we start to sort it out, and we reach the amount of money,
09:47 and we start to get the capital out of it, and the remaining will be the profits that will be distributed.
09:52 Is it easy for banks to do this?
09:56 Of course it is difficult. Why is it difficult?
09:58 Because the first thing is that banks' investments are a collection of many sources of money.
10:02 There are income and expenses, and there is the process of withdrawals,
10:06 and there is the process of withdrawals.
10:09 And this is where the real difficulty is in determining profits.
10:14 Exactly.
10:16 And at the same time, the bank invests its money in multiple forms.
10:21 The bank also uses its money to distribute the money to the clients,
10:26 and it also uses the form of sharing, and it uses the houses as a profit,
10:31 and it uses the rent with different clients and with different forms.
10:35 So, for the sake of the bank, and we can even say that the bank must rectify all these investments
10:40 in order to be able to distribute, then I am like closing the bank.
10:43 But what happens? The standards and the jurists said that we can do something called the legal rectification,
10:49 and not the real one. What does legal mean?
10:51 What happens in the foundations, and any company that has it, is that it is continuous.
10:55 It is not possible to distribute profits to any company,
10:58 and I am talking about companies in general terms,
11:00 it is not possible to distribute profits to the owners of the money or the owners of the company,
11:04 so I close and clear the company to tell them that the profits are yours.
11:07 The point is that the companies are continuous.
11:09 But what happens? We have the financial laws and the accounting standards
11:12 that tell us how we can clear our profits and how we can evaluate the assets that we have,
11:20 whether we are talking about companies or even about the bank's investments,
11:23 and as a result of this evaluation, we can, this is called the legal rectification,
11:28 and we can clear the profits that can be distributed to the clients.
11:32 The legal rectification or the clearing of the company's capital,
11:36 this is a matter that banks and financial institutions may be able to do,
11:41 but the problem is that they cannot expect profits and losses,
11:46 and perhaps some clients will withdraw a part of the deposit that they have deposited.
11:53 Let me hear from you my answer to this difficulty after this break.
11:58 Dear viewers, stay with us.
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12:26 Welcome again, dear viewers. We are talking about how to distribute profits in Islamic banks,
12:32 and our guest is Mr. Ehab Abdel-Aleem, an academic and an expert in Islamic banks.
12:38 Mr. Ehab, I asked you before the break that the subject cannot be determined by the bank,
12:46 or the word "expect" on the capital cannot be distributed to profits
12:51 if we do not make sure that the capital is safe.
12:57 Therefore, the rectification and clearing of the company's capital or economic activity does not solve the problem.
13:07 Let us say that it solves a large part of the problem.
13:17 The first thing is that the banks' investments are still there,
13:21 so it is not possible for the bank to start distributing profits to the capitalists or clients.
13:28 It will clear the work, but it will cause a judicial criticism,
13:32 and this happens even in companies.
13:34 And through this judicial criticism, it starts evaluating the assets and assets,
13:39 and turns them into cash.
13:41 So the bank can say that the size of the investments I have now is this, or the size of the number is this.
13:48 Therefore, it can determine the percentage of profits that are distributed to the client.
13:55 On the contrary, the judicial review solves a very big problem.
13:59 But Mr. Ehab, let me be honest with you.
14:01 Perhaps at the end of the project, the project will fail.
14:04 How will the profits be distributed?
14:06 I do not know whether the capital has become sound or not.
14:11 In traditional banks, we do not have a problem through what is called the number calculation.
14:17 Great. This is a very excellent question.
14:23 This brings us back to the sentence we said a while ago, before the break,
14:26 which is the idea of contradiction in its concept and implementation with individuals or companies
14:33 that differ to a great extent from those implemented by financial institutions such as banks.
14:38 What does this mean?
14:39 When I talk about a bank, the bank does not enter into one project or one economic activity.
14:43 The bank has sectors for research, trust, risk, and table studies
14:48 to determine the economic sectors it will work in,
14:51 and the nature of the projects in which it will invest its money,
14:55 and therefore it can distribute a set of profits generated from all the investments of the bank.
15:05 I cannot say that the bank can lose in a project.
15:08 Indeed, it can lose in a project, or it can have profit operations and customers can lose in all projects.
15:14 It cannot lose in all projects.
15:19 I mean the result of this multi-investment in several activities.
15:25 As long as I have the possibility, I have a problem.
15:28 I do not know if the capital has become safe or there are losses.
15:33 At the time when the financial list is being prepared,
15:39 you know that the financial list is in the financial center of the established bank
15:46 in December 31, 2024.
15:49 At this moment, what is the financial center telling me?
15:53 Is there a profit? Is there a loss? What is the size of the assets?
15:55 At this moment, I can determine the amount of money, the safety of the capital,
16:00 the money of the customers, and I can also determine the amount of the profit that will be distributed.
16:03 This is in line with the legal standards that I mentioned and the accounting standards.
16:09 Therefore, this is a big problem that has been dealt with in Islamic banks.
16:15 Mr. Ziab, there are a number of rights and solutions that Islamic economists have proposed.
16:23 They said that we can resort to what is called the cycle evaluation.
16:28 Therefore, the financial center of the bank knows about this project or this activity.
16:35 Therefore, it can evaluate the share.
16:39 If the client wants to withdraw his deposit, there is no problem.
16:46 He can buy the bank at the market price.
16:51 Therefore, we can get rid of the question of whether the capital will be profitable or not.
16:57 Or whether the capital is still there or not.
17:01 These are some of the ways that they resort to.
17:04 They said that these are the best ways.
17:06 As for the way of calculating the number and the minimum deposit,
17:10 or the calculation of the last period deposit, there are problems that we may talk about.
17:15 But I would like to hear your opinion on the topic of the cycle evaluation.
17:19 Let's summarize the two things.
17:27 These issues were discussed at the beginning of the Islamic banks.
17:34 They were challenges for the Islamic banks.
17:38 But now the system is dealing with this issue.
17:43 Especially after the distribution of profits was issued in 2009.
17:49 They worked on this issue in the institution since 2003.
17:53 The agreement was made on how to deal with these issues.
18:00 But let's not get into the issues of jurisprudence.
18:05 I am not a specialist in jurisprudence.
18:09 I specialize in banks.
18:11 In addition, the problems of jurisprudence will not end.
18:14 Even the form of the agreement to buy the bank is still not a prize.
18:21 We want to follow the general trend.
18:25 The majority of contemporary scholars say that it is permissible.
18:28 I do not want to be biased.
18:30 There must be someone who is biased outside the circle.
18:34 But in general, we follow the general trend.
18:37 They say it is permissible.
18:39 Great.
18:43 We usually refer to the agreed standards.
18:47 The legal standards that solved many of these problems.
18:52 I do not want to talk about this cycle evaluation.
18:57 How can it be done?
18:59 At any moment, the financial institution can be seen as a loser in this project.
19:09 Therefore, it can be evaluated.
19:11 If the client wants to withdraw his money, I have no problem.
19:17 How can I give him the profits if there are profits?
19:25 What is the concept of this cycle evaluation?
19:28 They wanted to get rid of the idea of accounts of the NIMR.
19:31 We will talk about this topic now.
19:33 They said that the cycle evaluation is to divide the investment fund into shares.
19:39 It is as if you are buying shares in an investment fund.
19:43 An investment fund is a share in the fund.
19:46 In the total investment of the fund.
19:48 We cannot say that you have a share with a specific company.
19:53 In the total investment of the fund.
19:56 And what happens?
19:58 Exactly.
20:00 A daily evaluation of the shares or the share that the client buys in the fund or the fund that the client buys.
20:09 And therefore, he can sell or withdraw at any time with the value that is now available according to the selling and buying prices.
20:16 The main idea that the cycle evaluation has is that it divides the investment fund into shares.
20:22 The client buys 2 or 3 shares.
20:24 He buys the share that he wants.
20:26 And therefore, at any time he wants to withdraw, there is an evaluation that is done for the fund.
20:31 And therefore, the value of the shares that he owns is determined.
20:37 The client at the moment of withdrawal from the fund or even if another client enters, the value changes little by little.
20:43 According to the sale, purchase, offer, demand, and other factors.
20:49 It also has more details.
20:51 But most banks do not work in this way.
20:55 Which is related to the cycle evaluation.
20:57 I want you to explain to us what is called the number account.
21:02 So that we can tell the viewers that the distribution of profits in Islamic banks does not depend on the same way that is in traditional banks.
21:12 What is the meaning of the number account?
21:17 If you allow me, I want to talk about two points before I get into the number account.
21:23 I know that the time of the program is fixed.
21:26 Okay.
21:27 But first, the idea.
21:30 The idea that we say that the traditional or standardized banks work in a certain way.
21:39 We will not work with it because they work with it.
21:42 This idea is not true.
21:44 We do not work this way.
21:45 Even the accounting standards issued by the IOUFI.
21:49 When they started at the beginning, they wanted to make an accounting standard to see how we can register financial transactions in our own offices and set up financial centers and so on.
22:02 Okay, are we going to start from scratch?
22:04 This is what has been discussed.
22:05 Are we going to start from scratch and make an accounting standard from the beginning?
22:10 Or can we see what are the accounting standards that are agreed upon internationally and see if the accounting standards that the world uses agree with us in Islamic banks or differ?
22:21 If it is agreed upon, we will work with it.
22:23 There is no problem.
22:24 We will not start from scratch.
22:25 Will it differ and not match with us?
22:27 No, of course not.
22:28 We will not work with it and we will start to see what are the standards that match with us in Islamic banks.
22:32 So, the idea that a specific bank will work in a certain way and we will not do this because a specific bank does this, will not be compatible with us.
22:40 The second point before we start with the accounting standards is the idea of the existing financial institutions.
22:46 We will not work with it if we do not agree with the Islamic rules.
22:48 This is what I meant, Mr. Ihab.
22:49 We have a real accounting standard.
22:51 You cannot apply this in a fight.
22:53 This is what I meant.
22:55 I understand what you mean, but I have received this question from many people who always say that the traditional banks do this and you do it like them.
23:09 I said that this is the opportunity.
23:11 This is not true at all.
23:13 It does not mean that the traditional banks do a certain transaction or do a certain service.
23:16 We do not want to invent a wheel from scratch.
23:19 We do a certain transaction, but we do not do it in a way that is compatible with the Islamic rules.
23:25 Mr. Ihab, I want you to show us now that the way in which the Islamic banks operate is not a problem.
23:39 The truth is that we faced some problems in the Islamic banks.
23:47 As we said, the idea that the bank's investments are continuous and do not stop.
23:53 We agreed that in order to distribute profits, we should have a real accounting standard.
23:59 After that, we said that this would be a legal accounting standard.
24:02 This was the first problem.
24:04 At the same time, the clients do not leave their money in the bank.
24:08 They do not say that the money in the bank will stay with you for a year or two and leave it.
24:13 No, there are some accounts that the client withdraws daily, monthly or otherwise.
24:18 We were going to deal with the money that came in and out, and at the same time, the investment of the bank is continuous.
24:25 From here, the banks resorted to what is called the "Nimr account".
24:28 What does the Nimr account mean?
24:30 The Nimr account works to determine the periods in which the amount of the client's money continues in the bank.
24:39 For example, I went to the bank and opened an account and put 100,000.
24:44 The bank starts to see that I put 100,000 in the 7th month.
24:48 How long will this money remain in the bank until it is distributed at the end of the year?
24:54 It will be with me in the 7th, 8th, 9th, 10th, 11th, 12th, 16th month.
24:58 The bank starts to distribute the 100,000 and reaches the total amount of the Nimr account.
25:04 The same is true for all the clients in the bank.
25:07 We have reached a million Nimr accounts.
25:10 This represents the amount of the client's money in the periods in which the amount of the bank's money was in the bank.
25:15 The next stage is to see the amount of the profits generated from the investments in the client's money.
25:23 All the profits are divided into the number of Nimr accounts.
25:28 The number of Nimr accounts is the share of the client's money.
25:33 Then, the number of Nimr accounts is multiplied by the value of each Nimr account.
25:39 I want to say that there is a little bit of detail in this issue.
25:43 But, unfortunately, the time is limited.
25:46 I have to thank you, Mr. Zihab.
25:50 Thank you, Dr. Zihab.
25:53 We want you to be with us in the next episodes.
25:59 I know that the time is limited.
26:01 Thank you, Dr. Zihab, for your time.
26:06 At the end of this episode, I would like to thank Mr. Zihab Abdel Alim, an academic and an expert in Islamic banks.
26:13 You can also send your questions to the email address on the screen.
26:20 You can also watch the episode on nasa.nbc.arabia.com and on social media.
26:26 Goodbye.
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