Islamic Banker speaks to Lariba Bank of Whittier Chairman and Chief Executive Officer Dr. Yahia Abdul – Rahman
IslamicBanker (IB) : What made you think of starting RIBA Free (RF) banking which you also call responsible Banking and particularly why in United States of America and not elsewhere in the world?
Dr. Yahia Abdul Rahman (Dr) : I moved to America almost 50 years ago from Egypt. That was after the devastating defeat of 1967, the occupation of huge parts of Egypt and the Middle East and the shattering of our dream of building a new future in Egypt.
When I arrived in Madison, Wisconsin (close to Chicago) the Muslim community was small and not well organized, Americans did not know much about Islam, and students on campus came from all over the world including Muslim countries like from Malaysia, Iran, India, Pakistan, Iraq, Syria, Egypt, Lebanon and Palestine to name a few. We started organizing and getting to know about other Muslims for the first time in our life, we also started answering questions from our fellow American students and university professors and staff. We prayed in the basement of a church or at the student union. We started a small Sunday school for the children of fellow students. In brief, a Community of Muslims was started in America in the mid-sixties of the last Century. Many of these students graduated WITH Ph.D.’s, MS’ and Bachelor degrees and were ready to work. At that time, the Vietnam War was raging and America had the draft. That created vacancies in many positions. America made it easier for the foreign students and these students after graduation with an MS or a Ph.D. were formally invited by the Immigration Department to become Permanent Residents in preparation of becoming American Citizens. So, many of our generation landed jobs in large companies and medical centers in many cities around America. Each of these new settlers had a dream of building a Masjid and an Islamic School along the lines of the Catholic and Jewish schools.
My family and I moved to Dallas, Texas in the south and started working for a major oil company. As we arrived in Dallas we looked for the Masjid. There were none. We asked about the Friday Congregational prayer (Jumaa), there were none. We started for the first time in the history of Dallas, Texas Jumaa prayer attended by the Imam and another praying behind him. The prayer was held in a public park behind a major university (SMU). That was the beginning of the Islamic Association of North Texas – IANT – growth.
In 1972, the community started growing and we wanted to have our own masjid instead of having our Friday Jumaa on campus and Sunday meetings and school at apartments clubs. We found a nice home sitting on a 2-acre piece of land for $35,000. We had collected $17,000 in donations. Some of the richer members who dealt with banks suggested that we go to a bank to get a loan. That created a big problem because of Riba. I was the Chairman and I confessed that my knowledge about Riba is what I read in a small Arabic Language book about Riba. I concluded that I need to educate myself. That prompted me to go back to University of Texas to study international economics, monetary theory and finance to educate myself in this field. I also started polishing on the Islamic Jurisprudence regarding Riba and how to at least avoid falling in it. That started the seed of a dream that the American Muslim Community own its own financial institution in America which is owned by the community to act as a place for the community to deposit its savings and use these deposits to invest prudently in the development of the community.
I spent most of my weekends during the years travelling to different cities in the US and Canada to help raise funds and donations to help build an Islamic Center and/or a school. When I came back home on Sunday I shared with my wife the dream of having our own financial institution that can be the engine of economic growth of the community.
That was – a long answer – the background of starting LARIBA – American Finance House. LARIBA is an important part of the Islamic Movement in our country America. We are growing a banking and financial institution not only for Muslim Americans but for all Americans. Today, LARIBA is the “Coca Cola” of RF finance in America and the world. We own a full service Commercial Community National Bank and we offer all Banking and Finance services to all states. We have a capital of $6 MM for LARIBA and $11 MM for the Bank and we service a portfolio of loans and mortgages totaling $500 MM between the Bank and LARIBA. Granted; these are small numbers but we aspire to grow much bigger because we have established that the Pilot Prototype model has worked very well. We are now in the market to raise from $50 to $100 million to expand our operations in the US by acquiring small community banks in strategic location we identified based on our 30 years of operating experience. We o\pray that we shall be able to offer the American consumer at large an alternative RF Banking System: LARIBA Bank of America by the blessings of the Almighty God; God of the Buddhists, the Hindus, the Jews, the Christians and the Muslims.
IB: Was it initially a challenge to convince Muslim community in United States of America to adopt RIBA free banking? Is it why Bank of Whittier was a small bank for a very long time, confined to few branches only?
Dr : Yes, it was a big challenge. I first went to the rich and affluent. They said: Yahia, if you need donations, we shall be glad to but investing and becoming shareholders in the community, that is a big headache, let alone Islamic Banking is just same as conventional banking but with different names. So, it was decided to motivate friends in the middle class who believe in the vision and dream of having a Community-based Riba Free (RF) financial institution. My usual statement to the potential investors went like this: Invest $20,000, $10,000 or even $5,000 and please do not hate me if we lost this investment! We raised $200,000 in 1987 and in Ramadan of the same year we opened our bank account for LARIBA. Our first investment was to finance our first home RF (Riba Free) mortgage in Madison, Wisconsin for a friend who was a Professor at the University.
I want to share an experience here to hopefully reflect the teachings of Prophet Muhammad (peace be Upon Him) and for that matter all of God’s Prophets, the principle here is gradualism and to communicate with people with the language they understand. When we went to register the company, and apply for a Finance Company license we used the name: American Finance House LARIBA. They asked us about the meaning of LARIBA. Because we did not know how the administrator will react we explained that: LA stands for Los Angeles, R stands for Reliable, I for investment, B for Bankers and A for Associates: Los Angeles Reliable Investment Bankers Associates – LARIBA. For us Muslims it is NO Riba – in Turkish it is also same “Faiz Cis”. Today, after 30 years the Bank Regulators commend us for using the RF (Riba Free) Discipline which reflected on the exceptional performance of the Bank and its impeccable record for Safety and Soundness.
The strategy we developed to identify a bank that we can buy to implement RF discipline in it called for a small bank with a capital of $2 to $3 million because we did not have enough money and we wanted to rely on the community and act within our means by putting our – and not others’ – money where our mouth is. We also wanted a bank, which has a small loan portfolio to avoid having to deal with unknown problem loans because we did not have the extra money to contract an outside consulting form to do that. And, we looked for a National – not a State – Bank which is regulated by the Federal government and not a state government to allow us to serve all 50 states of the USA.
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