Blogs > HNN > THREAT OF ISLAMIC BANKING

May 23, 2006 1:56 pm


THREAT OF ISLAMIC BANKING



While Western elites focus on the problems of immigration and assimilation, they ignore the threat Islamic banking is posing to the global economic system. Indeed, we are facing the emergence of a new financial Berlin wall or a Shariah compliant global financial system.

Banks seek Islamic scholars versed in finance Gillian Tett reports on the front page of the Financial Times:

Leading banks are scrambling to find Islamic experts who can issue religious edicts (fatwas) approving new financial products, such as"Islamic" bonds, hedge funds or loans.

It is impossible to exaggerate the dangers inherent in this headline. On the face of it, we are dealing merely with"interest free" financial instruments. But that may be just the beginning. For banks such as the Dubai Islamic Bank have a Shariah board which has to be involved with all the aspects of a proposed transaction so that it would issue a formal fatwa endorsing it as fully Shariah compliant.

Clearly, such boards are not only bound to raise the cost of the international finance (some members get as much as $500,000 for their participation) but also are open to obfuscation and corruption as, none other than Turkish PM Erdogan recently warned. He recommended replacing the term"Islamic banking" with"interest free" and added"that trouble will emerge when efforts are made to disguise the interest ratings issue under a religious cover."

Even more importantly, such boards are sure to increase the power of the most orthodox Imams who alone have the standing to issue a fatwa accepted by all Muslims. Just consider the additional future vulnerability of countries which would find themselves in Islamist cross hairs in the manner Denmark has. There is little doubt that Imams sitting on Shariah boards would be pressured to withhold their approval of any instrument directly or indirectly connected with the"offending" country or institution. The term self-censorship is bound to acquire a new meaning.

We should also recognize that much of the impetus toward the development of Islamist instruments is motivated by a wish to exploit Muslim hostility towards the global marketplace in the effort to divide it. Erdogan told his fellow Muslim leaders:

"We could quit using such old-fashioned terms as hostility towards foreign capital. We could adopt a warmer approach to the notion of global capital. I personally do not think that money is a matter of faith. It also does not know national boundaries either. Money is like mercury; it goes wherever conditions are suitable for it."

I doubt they will listen as they are too sure they would benefit from the trend. I am even more worried that the West would do what it often does, try to lock the barn door after the horses have bolted.



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Jon Hendry - 5/21/2006


Do you also think that Western supermarkets and food producers should not make and sell kosher products for Jewish customers? After all, I'm sure that includes working with some kind of Jewish authority who can declare the products are in fact kosher.

I'm not sure what the difference is between Citibank offering services geared to Muslims' religious needs and Wal-Mart offering products geared to Jews' religious needs.

I hope I don't come off as anti-Semitic, because that's not my intent. And I certainly have no problem with the market providing kosher goods to meet the demand. It's simply that the production and sale of kosher goods was the first analog that came to mind.

There's also the way that corporate and other institutional cafeterias don't serve meat on Fridays, presumably in recognition of Christians who don't eat meat on Fridays. I suppose these cafeterias should stop offering fish and pizza on Fridays, and just throw the unsold food away at day's end.

What's the difference, exactly, that makes it so nefarious for the market to meet the religiously-based needs of one large set of customers, but not with others?