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The Forum > Article Comments > Islamic finance could be a growth industry > Comments

Islamic finance could be a growth industry : Comments

By Maria Bhatti, published 30/7/2009

Islamic finance can offer hope in combating worldwide anti-Muslim prejudice.

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It's no secret I'm a monetary reformist, and I think Sharia Banking is a step in the right direction. Banks should definitely share more of the risk, and contribute more of the labour, to earn their percentages.
And charging interest is still usury.
I rather think, however, that banks in moving in on the Islam market, are more interested in gradually subverting Sharia, than adopting it.
Posted by Grim, Thursday, 30 July 2009 9:54:33 AM
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I am all for a community based lending and saving type of system. It could be run on a user pay situation without share holders.
Big banks are for share holders, They have to earn billions each year just to please shareholders. Our govt should run a community bank.
Posted by Desmond, Thursday, 30 July 2009 11:14:25 AM
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I think in the end the only way western views on Islam will improve is if we see a little more democracy and human rights observed and a lot less bombing. How you lend money is of little concern.
Posted by Kenny, Thursday, 30 July 2009 12:36:23 PM
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An interesting and timely article.

Somewhat bitter, in parts...

>>...the community focusing on... the global financial crisis rather than revitalising old and tiresome debates about Muslim women’s clothing.<<

And contentious, too.

>>Islamic finance has recently risen as a topical debate in Australia due to its resilient nature in the current financial market.<<

Given that the market conditions affect every business - not just Banking - "resilient" might just be something of an overstatement.

Here's some recent commentary from Euromoney, the world's leading financial magazine, observing the fallout from the first major default on a sukuk (Shariah-compliant bond)

http://www.euromoney.com/Article/2245562/Islamic-finance-Sukuk-market-on-trial-as-Islamic-bonds-default.html

The broader concerns are cultural, rather than financial.

"Shariah law doesn’t even contemplate a default, because you can’t default if all you’re ever giving is a profit share. If there are no profits, then you aren’t defaulting. You are just deferring, or sitting around the table to discuss,"

The article also observes that

"One of the principles of Islamic finance is that participants must share risks and benefits... 'Unfortunately these instruments were sold to western investors who expected that the profit terms were equivalent to interest, and so a fixed obligation,'"

Another issue is, unfortunately, that the products themselves may be subject to changing religious opinion

http://www.arabianbusiness.com/504577-most-sukuk-not-islamic-say-scholars

However, there is without question a place in the financial market for Shariah finance.

As a small business owner, I would value highly the participation of a Bank in the growth of my company, as opposed to simply signing my family home away as security for a high-interest loan.

It's almost a no-brainer.

But the shift of our economy onto that level of trust and cooperation in financial matters is not going to happen in my lifetime.

For a start, there's an entire culture that needs changing.

Bank participation in Australian businesses today usually signals the onset of an orgy of gouging and profiteering.

And in case there's a Macquarie Bank lawyer reading this, no, I'm not talking about Sydney Airport.
Posted by Pericles, Thursday, 30 July 2009 3:27:03 PM
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A piece of Islamist's propaganda. The French President should have not only banned the silly burqa but also the hate book of the Islamists, the Koran; the book that has kept Muslims backward and frozen in time since the 7th century.

“Those who make no effort to understand Islam and its extensive intellectual history will never be able to embrace an intercultural attitude…”

Perhaps Ms. Maria Bhatti would like to enlighten non-Muslims how the wearing of trousers by Muslim women is deemed indecent and deserves to be canned? Or how drinking beer deserved 6 strokes of the cane?

http://news.bbc.co.uk/2/hi/africa/8147329.stm [Sudan women ‘lashed for trousers’]

http://news.smh.com.au/breaking-news-world/beerdrinking-model-faces-caning-20090721-drmu.html
[Singaporean Muslim model sentenced to six strokes of the cane in Malaysia after she drank beer.]

Dr. Patrick Sookhdeo (Pakistani descent), an ex-Muslim specialising in Islamic matters gave a 50 minute talk “Understanding Shari'a Finance: The Muslim Challenge to Western Economics”. He has also written a book by that title.

http://www.heritage.org/press/events/ev032409b.cfm {streaming audio}

Sookhdeo has shown conclusively that Islamic finance as we know it today is part of the Islamists’ agenda to establish the Islamic caliphate.
Posted by Philip Tang, Thursday, 30 July 2009 8:10:16 PM
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Islamic Finance is fine with me; cant see why Phil T is so hot and bothered about anything that smacks of islam ( and there is certainly a lot of smacking that goes on in parts of the Islamic world).
Posted by sneekeepete, Friday, 31 July 2009 4:56:32 PM
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The author says: "Those who make no effort to understand Islam and its extensive intellectual history will never be able to embrace an intercultural attitude and instead, hatred and ignorance will be rife".

I always find these claims that Islam has an extensive intellectual history to be rather amusing. If they were true then why is it that there is a near-absence of intellectual activity in the Islamic world today? Why is it that the numer of Nobel Prize winners from an Islamic background could easily meet in my bathroom? (There are five that I can find - two from literature, one from chemistry, one from physics and one from economics.)

That small number is matched by the number of Australian-born Nobel Prize winners who are still alive! So while we often decry the anti-intellectual traits of the Australian culture and ethos, let's not forget that Australia has produced as many - actually more - Nobel Prize winners than the entire Islamic world with a population which is at least 60 times bigger than ours.
Posted by Savage Pencil, Friday, 31 July 2009 5:50:13 PM
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sneekeepete,

Dr. Sookhdeo emphasised that Islamic banking is of recent origin developed by the Pakistani, Abul Ala Mawdudi, the founder of the Islamists organisation Jamaat-e-Islami which is closely associated with terrorist organisations.

http://www.militantislammonitor.org/article/id/3769

“Interest-free banking seems to be of very recent origin. The earliest references to the reorganisation of banking on the basis of profit sharing rather than interest are found in Anwar Qureshi (1946), Naiem Siddiqi (1948) and Mahmud Ahmad (1952) in the late forties, followed by a more elaborate exposition by Mawdudi in 1950 (1961).”
http://www.islamicbanking.nl/chap4.html .

Dr. Patrick Sookhdeo explained Islamic finance very clearly in his talk. He mentioned that Islamic scholars from Al azhar university, the chief centre of Sunni Islam learning, viewed normal banking practices (based on fixed interest payments) as being compatible with Islam. The word ‘riba’ is translated as ‘usury’ (profiteering by charging exorbitant rates of interest) and not ‘interest’.

As an example, the Islamic country of Oman does not permit Islamic banking.

So it is obvious that Islamic banking is of recent origin and is currently promoted by extremists with the aim of imposing sharia law world-wide.

Being a former Muslim, Dr. Sookhdeo is Muslim-friendly but weary of the Islamists’ agenda. He is worth listening to.
http://www.heritage.org/press/events/ev032409b.cfm
Posted by Philip Tang, Friday, 31 July 2009 9:24:16 PM
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Sharia finance is a con - any interest payments are simply built into the principal, and the installments adjusted accordingly. It's an exercise in semantics. Not to mention it will increase the influence of Islam in the Western world - and the extremist Saudi Wahabbis will be at the forefront because they have the most money. We've all seen what Wahabbis espouse.
Posted by benny tea, Sunday, 2 August 2009 9:47:04 AM
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I enjoyed the article and all but one of the comments, that one being so negative, so biased as to be irrational. On the faith side, the Koran (various spellings exist) is as beautiful and as flawed as the Bible. Indeed there are those aspects which are identical and if you believe in one God, whatever his name, then they should be identical, at least in parts. But I have read a translated version and I enjoyed it as much as I did reading the Bible.
On the money lending side,if it works why knock it and it certainly works for those who adhere to it. The Jews have a similar concept as do many Vietnamese communities. That is why they are doing so well, compared to those who run to the big four banks
Posted by Ange, Monday, 3 August 2009 11:03:21 PM
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We already have something similar to Islamic banking in Australia. It is called venture capital and has been around for decades.

The islamic banks just copied it from the west as their ability to lend money was curtailed by silly religious laws.

Venture capital is not cheaper than borrowing money. Venture capitalists take larger risks and get their pound of flesh.
Posted by Shadow Minister, Wednesday, 5 August 2009 9:14:58 AM
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The Jews and the Vietnamese do better because they are extremely tight-knit communities. They stick together, maintain excellent networks, and help each other out without question. Their sense of community is something we could learn from - but wait, that's probably racist.
Posted by benny tea, Friday, 7 August 2009 9:36:04 AM
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