easier, without even the need for a regulatory change or transformation of
the current laws of the land in the United States. We believe that RF bank-
ing and finance is all about training the management and staff and how they
all handle the most important of all God’s gifts—the trust given to us by our
customers when they entrust us with their hard-earned money, savings, and
retirement planning funds and their private personal information. It is also
about how management looks at the balance sheet of the bank, how the RF
credit (loan) portfolio is developed, and how the RF bank liquidity is
invested.
The first step the new management took when it arrived at the bank
with the new RF banking team was to assess what was going on at the
bank, in order to progressively transform the bank into an RF operating
bank. Here is what we did.
Evaluation and Review of Existing Services
Review Existing Loans and Add New Credit to the Portfolio Using the RF Finance
Principle of Mark-to-Market We were lucky to have a bank with a very
small riba-based conventional loanportfolio that equaled about 20 per-
cent of total deposits. That gave us a wonderful opportunity to start
building an RF finance portfolio using the principles of marking-to-mar-
ket and the RF finance model based on Shari’aa. The first step we wanted
to take was to invest the large amount of cash we had on hand at the
bank in different projects, such as commercial buildings, home mort-
gages, schools, faith-based worship centers, fast food franchises, medical
doctors’ clinics, and automobiles. We were lucky because we had accu-
mulated extensive RF financing experience since 1987, when we started
LARIBA.
The building of an RF finance portfolio needed time, and the bank had
a very large cash position. In situations like this, a typical bank management
contacts loan brokers to buy loans through them. This option was not avail-
able to us, because according to Shari’aa buying and selling of debt (dayn)is
prohibited. In fact, this stipulation has been one of the most important
factors that helped many Islamic banks fare better than conventional riba-
based banks during the 2008 financial meltdown. In RF banking, the prac-
tice of investing the bank’s money in different finance facilities must be
conducted by the bank credit department, and it should be done with those
customers who are known in person to the bank so that the money will
be invested with them in the projects they need to finance. On the other
hand, RF bankers are not allowed to sell their loans or sell the servicing of
these facilities (servicing a loan means taking care of billing clients, collect-
ing monthly payments, escrowing the funds needed to pay taxes and
Operating an RF Bank in the United States 343