JAK: An interest-free Bank

JAK: A non-Muslim Bank with a Muslim Philosophy

I came across this interest free Swedish customer-owned Bank called JAK (Jord Arbete Kapital).  Working on the principle of “Not-for-Profit banking”, it neither pays any interest on savings nor charges any on borrowings – a principle it shares with Islamic Banking. JAK is fully registered, licensed and is operating since 1970. It’s founders were non-Muslims. It has 30 paid staff and about 30,000 members or customers. They saved a sum of € 97 million and borrowed € 86 million during the year of 2008.

JAK operates on the following fundamental principles:

    • Taking of interest is inimical to a stable economy;
    • Interest causes unemployment, inflation and environmental destruction – in some
    combination;
    • Interest moves money in the long term from the poor to the rich, and;
    • Interest favours projects, often large-scale, which yield high profits in the short-term.

How True!!!

The way Bank works is:

 1- Each member pays a membership fees (very minimal)

2- Members deposit money and earn Points based on the amount & length of time money is left in the bank

3- Members can borrow money, depending on the points they acquired

4- New members can also borrow money if they can arrange two guarantors

5- Loan can also be sanctioned if one can put their property as security. A property bought through the bank loan can be used as security at 75% of the actual value

6- There is a small administrative fees (1 or 2 % of the loan) on loans which is used for running the bank.

Taking an example:

–       Member borrows 12000 for 12 months

–       Member has to pay per month = 1000 + admin fees + 1000 (additional)

–       Member would have paid back 24000 at the end of 12 months

–       The additional 12000 will be returned back to the member at the end

–       This additional money is used to give loans to others during the year

Surprisingly there are very few credit losses or defaulters. It is inspiring because we the Muslims believe in interest free trading but could not manage to implement it anywhere (to the best of my knowledge). The Islamic banking currently in practice is all based on interest bearing banking model and makes up for interest one way or the other.  We should learn from this example and setup a real interest free economy. If non Muslims can do it why can t we? After all this is not a need, rather it is Allah’s Order upon us.

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Just Read JAK bank’s philosophy:

JAK’s ultimate goal is the abolishment of interest as an economic instrument and to replace it with other, less harmful ones, that are in the best interest of supporting its members in building healthy and sustainable communities.

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To achieve this goal, JAK works on two fronts:

1. Ideological: – To disseminate information on the ill effects the taking of interest has on the
economy, society at large and the environment and to inform of alternatives.

2. Practical: – To administer an interest-free savings-and-loan system to show that interest-free financing is not only feasible but also quite valuable in helping to liberate people weighed down with heavy interest loans.

JAK does not operate in any country other than Sweden, though they have helped others in different countries to establish similar banks. There is plenty of information on the internet about them. Please tell about this to people in banking & finance, especially the Islamic minded.