The Art of RF (Riba-Free) Islamic Banking and Finance: Tools and Techniques for Community-Based Banking, 2nd Edition

CHAPTER 16 RF Credits (Loans) in Contrast to Types of Riba-Based Loans

Over the years the conventional riba-based banks developed a number of lending products to meet the market demand and to diversify product features in order to compete with each other to meet market needs and to attract new customers. These loan products are all based on the idea of renting money and using it for different uses by the customer to finance his or her financial needs. In this chapter, the different types of riba-based loans available on the market will be discussed and their RF applicability will be analyzed. The types of loans discussed in this chapter will include some of the popular types used by riba-based banks and will not include every type. As the reader develops a good grasp of the basic concepts, he or she can let their imagination and analytical capabilities go in order to develop RF credit products and services that comply and are based on the Judeo-Christian-Islamic Shari'aa law.

OVERDRAFT PROTECTION FOR HOLDERS OF CHECKING ACCOUNTS

Most banks in the United States offer their customer a credit facility called overdraft protection. It was designed to cover deficits in the checking account when a customer writes a check that is not covered by the balance available in the account. The bank, by applying this service, would honor the check, create an overdraft loan to balance the deficit in the account and charge an overdraft service fee that can range between $20 and $50 plus interest, ...