Sharia Finance still matters


by guest
15th November, 2009 at 6:33 pm    

This is a guest post by Persephone.

Islamic finance (based on Sharia Law) is reinforcing London as a financial centre and supporting Britain’s property and financial sectors. Two of the largest property deals in Britain have been funded on the basis of Islamic finance:

1) The £1 billion Chelsea Barracks development is the most expensive property deal in Britain. Sold by the MoD to the Candy brothers and the Qatari government who plan to develop it into a housing estate of 638 market rate and affordable homes.

2) The Shard, a new landmark 310m tower above London Bridge Station will go ahead despite the withdrawal of lenders, such as Credit Suisse, during the credit crunch. It was saved by the financial backing of four Qatari banks and UK developers Sellar. The Tower is to become the home of Transport for London.

(The world of football may also benefit since Qatar is bidding to stage the 2022 World Cup.)

The principles of Islamic finance show Sharia to have an ethical side:

- Fairness: all make informed decisions, are not misled.
- Social justice: economic health of the majority – not wealth in the hands of the few.
- No usury or interest.
- Risk and profit is shared: profit distribution is based on effort not capital ownership.
- Contractual certainty and avoidance of ambiguity.
The advent of sharia law in the UK is wrongly perceived as being in the last 5-10 years and thereby linked as a by product of mass immigration brought about in the tenure of a Labour Government. In fact it has been used on commercial deals since the 80′s – at the height of the Conservatives.

In a recession, British businesses are seeking such fresh overseas markets, with more offices being opened in the Middle East. Consequently (outside of the Muslim world) London is the global capital for Islamic Finance and attracts Islamic banks and middle east investment because of its flexibility and willingness to innovate. English law is also the preferred jurisdiction for these deals and UK based lawyers, accountants and other experts are used.

The irony is that financial sharia products are developed in the UK and taken to the Middle East. The UK is also the financial centre of choice for listing Sharia Bonds called ‘Sukuk’ and has established the world’s first secondary market for Sukuk. According to the Financial Times, trade volumes in London ‘rose from a trickle in December 2006 to about $2bn in January 2007.

In 2007 the Islamic Bank of Britain (first UK retail bank) had over 50,000 accounts and approx. 42,000 customers. The size of the Islamic mortgage market in the UK is estimated at £500m. In addition, these banks bring employment and demand for property since their head office and management must be in the UK.

Don’t like globalisation or multi-culturalism? Then you are denying Britain its long heritage of seizing overseas opportunities. And that’s very un British.


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  1. pickles

    Blog post:: Sharia Finance still matters http://bit.ly/1jR5vZ


  2. amanimoney

    Pickled Politics » Sharia Finance still matters: Islamic finance (based on Sharia Law) is reinforcing London as.. http://bit.ly/qYEwE


  3. Ryan Phillips

    Pickled Politics » Sharia Finance still matters: Islamic finance (based on Sharia Law) is reinforcing London as.. http://bit.ly/qYEwE


  4. Wendy W

    Pickled Politics » Sharia Finance still matters http://bit.ly/3Pk4Qy


  5. A Bengali In Toronto

    What is the capital of "Islamic" financing? Apparently – London, UK! http://www.pickledpolitics.com/archives/6550


  6. Labrina

    Pickled Politics » Sharia Finance still matters: Fox Business channel, annoyed that stock market is doing well .. http://bit.ly/qYEwE


  7. Nav S.

    RT @a_bong: What is the capital of "Islamic" financing? Apparently – London, UK! http://www.pickledpolitics.com/archives/6550


  8. amanimoney

    Pickled Politics » Sharia Finance still matters: The size of the Islamic mortgage market in the UK is estimated.. http://bit.ly/qYEwE


  9. Internet Cafe Solution » Blog Archive » Pickled Politics » Sharia Finance still matters

    [...] more here:  Pickled Politics » Sharia Finance still matters This entry was posted on Sunday, November 15th, 2009 at 11:33 am and is filed under Finance. You [...]




  1. Sharon — on 15th November, 2009 at 10:02 am  

    It's the one area that is fair then! How about all the suffering women?

  2. raymondterrific — on 15th November, 2009 at 11:03 am  

    I don't mind the ethical side

    It's the executtion of gays, subjugation of women and all the chopping bits of parts that bother me. But I'm funny like that.

  3. Boyo — on 15th November, 2009 at 12:20 pm  

    “Don’t like globalisation or multi-culturalism? Then you are denying Britain its long heritage of seizing overseas opportunities. And that’s very un British.”

    It's perfectly true Britain has a “long heritage of seizing overseas opportunities” – it was called the British Empire. I'm glad to see you're a fan too!

  4. Sunny H — on 15th November, 2009 at 12:50 pm  

    How about all the suffering women?

    Didn't realise the article was calling for that too! could you point out where that was?

    This is a silly argument because some democracies also drop napalm and white phosphorous on innocent civilians or violate human rights. Does that mean a democracy is a bad idea? Who said we can't pick and choose?

  5. cjcjc — on 15th November, 2009 at 1:01 pm  

    Could you explain precisely how the profits from the Chelsea Barracks development will be distributed on 'based on effort not capital ownership”?

  6. Ravi Naik — on 15th November, 2009 at 1:40 pm  

    No usury or interest.

    How do banks make money then? How do I benefit as a potential home buyer, if I get a mortgage from a Sharia bank as opposed to any other bank? I get the feeling that this is all a matter of wording in order to circumvent religious law. Banks need to make a profit.

  7. boyo — on 15th November, 2009 at 1:50 pm  

    There's nothing wrong with sharia finance, although it is a bit absurd to suggest that's it's saving the UK from the recession. The truth is the Western financial model generates more wealth – otherwise the global market would switch to sharia.

  8. persephone — on 15th November, 2009 at 2:06 pm  

    Banks would charge a mark up on a selling price but not conventional interest – see this link http://news.bbc.co.uk/1/hi/8025410.stm

  9. persephone — on 15th November, 2009 at 2:11 pm  

    Making profit is allowed but not excessive profit which is interesting since in the current climate it is excessive profit that many are up in arms about.

    Banks would sell things with a mark up but not conventional interest – see this link http://news.bbc.co.uk/1/hi/8025410.stm

  10. persephone — on 15th November, 2009 at 2:14 pm  

    “Western financial model generates more wealth”

    It does but many would say for those few for whom it creates excessive wealth & the western model is what has created the current financial 'pickle'

  11. persephone — on 15th November, 2009 at 2:21 pm  

    I can't detail how that specific deal was structured. Thats what the advisers get paid for.

    But it is based on the concept of mutuality eg not paying any of the surplus (or profits) to shareholders, but it is passed on to for eg policyholders (if selling insurance) through higher payouts from a profits fund.

  12. persephone — on 15th November, 2009 at 2:24 pm  

    Thats the point Boyo. Not everything is negative all the way through.

  13. cjcjc — on 15th November, 2009 at 2:26 pm  

    So it might not be based upon that principle at all?

    And the Shard?

    Or have you just chosen those examples because Arab money is involved, and you have no idea whether the actual deals are based upon “Islamic finance” at all?

  14. Ravi Naik — on 15th November, 2009 at 3:03 pm  

    Making profit is allowed but not excessive profit which is interesting since in the current climate it is excessive profit that many are up in arms about. Banks would sell things with a mark up but not conventional interest

    When you want to buy a house, the bank actually buys you the house, and then you pay instalments to buy shares of that property until you completely own it, but you also you pay a “rent”. This rent or any markup established by the Sharia bank are by all effects the interest that any one of us pays in any bank. And is there a way to objectively measure what “excessive profit” means?

    I do like the concept of ethical banking, and I like the idea of being able to control where my money is being invested.

  15. halima — on 15th November, 2009 at 6:49 pm  

    Good post, i have often wondered how Islamic banking works etc. and in general have thought about the different options of ethical banking out there. Guess we should all be thinking about alternative and more sustainable ways to do finance.

  16. takhalus — on 15th November, 2009 at 6:54 pm  

    essentially Shariah compliant banking is ethical banking with shared ownership options for mortgage equivalent. I'd prefer if it was marketted broadly like that and the Shariah bit was a side point…

  17. Boyo — on 15th November, 2009 at 11:58 pm  

    Of course not everything is negative all the way through, but equally to imply because one thing is good the rest may be is a kind of whataboutery in itself. Sharia finance – good, Sharia law – bad.

    There are a lot of positives from Islam, including the emphasis on abstinence from alcohol (which is only bad for you, despite the “one glass of wine” thing) and on spirituality – if we all prayed just once a day it might remind us there is more to life than PS3s (although not much, I confess). However it is its extension in to the public realm that creates difficulties. Sharia finance can cross over, Sharia governance cannot (without, that is, tremendous conflict, misery and injustice).

    One might argue that one cannot separate the one from the other, but I think that's nonsense. However the Islamic voices that argue for personal conscience are drowned out by those who wish to use the out-moded aspects of Islam, which were developed due to particular historical circumstances, to further their own, and not God's, agenda.

  18. persephone — on 16th November, 2009 at 1:39 am  

    “So it might not be based upon that principle at all? And the Shard? Or have you just chosen those examples because Arab money is involved, and you have no idea whether the actual deals are based upon “Islamic finance” at all? “

    Both were conducted using Sharia. Thought I 'd made that clear in the article…

    It is done on a business model tailored for that deal set up ensuring compliance to, and a complement b/n, UK legislation and sharia law. A shariah scholar would have signed off the business model as being complaint. A UK legal team (an islamic finance lawyer regulated by the UK Law Society) would have structured it so that it met sharia principles plus ensured it met UK laws & governance. I cannot reveal the details because of confidentiality. And a UK lawyer would not break client confidentiality plus as it is tailored advice (like any other business deal) that is what they get paid for though they would publicly confirm & promote it as islamic finance.

    If you think such UK lawyers are not telling the truth (and the Law Society would be hot on their heels if so), ultimately, you can approach the FSA to check if these deals were based on such principles as they are the regulators who have approved islamic finance/sharia business to be conducted in the UK. The FSA by the way, have accommodated for and recognise these deals as separate financial models, as they see it is a growth market and want to encourage it further.

  19. cjcjc — on 16th November, 2009 at 2:15 am  

    Or perhaps it was done for *this* reason?

    “Before changes to stamp duty regulations, Sharia-compliant property deals would have attracted stamp duty twice for home sales and three times for commercial building sales because stamp duty is payable on commercial leases. The changes should have meant that stamp duty was payable only once, in line with conventional mortgages. Commercial property investors have discovered a loophole under which the bank includes an option for the original seller to buy back the property. This technical detail means that, for tax purposes, there has been no transfer of land and, therefore, no stamp duty falls due.

    The emergence of the loophole comes only weeks after the Ministry of Defence completed the sale of Chelsea Barracks to Project Blue Guernsey, a company owned by Qatar and an offshore vehicle controlled by Christian Candy, a British luxury-flats developer, in a £959 million deal. Chelsea Barracks is being managed by Candy & Candy, a firm of designers owned by Mr Candy and his brother Nick.

    Nick Candy declined to comment on the stamp duty aspects of Chelsea Barracks. He said: “We are under strict confidentiality with the banks and our partners on the deal. Project Blue Guernsey can’t comment.” “

    http://www.timesonline.co.uk/tol/money/property

  20. persephone — on 16th November, 2009 at 3:05 am  

    “It's perfectly true Britain has a “long heritage of seizing overseas opportunities” – it was called the British Empire. I'm glad to see you're a fan too!”

    Focusing on the negative again.

    If words are to be put in my mouth I'd rather they were mine. We British have brought some good things back from overseas – my favourite is the humble potato, an immigrant food from South America and now a staple of the British diet.

  21. persephone — on 16th November, 2009 at 3:44 am  

    I don't deny that developers etc will not want to benefit & that the mixing of western deals with sharia principles is of worry to those who think it may compromise Sharia principles – did you read the link I posted yesterday in the reply to Ravi Naik which mentioned this? – anyhow the pertinent extract from that link follows below:

    “But there are some who fear that by expanding the Islamic way is becoming less Islamic.

    “Unfortunately what is happening is that Islamic finance in some ways is moving more and more closely to the conventional finance,” says Prof Habib Ahmed, a world authority on Islamic finance. If you look at the development in the past few years, Islamic finance appears to be mimicking most of the products of conventional finance.”

    There has never been a better time to champion an economic model which is different to the one laying in shreds on Wall Street, says Prof Ahmed. But he believes that the Islamic concept is being diluted.

    “As people after this crisis are looking for solutions…the Islamic finance industry is moving towards that very system,” he says. “I think it is time for Islamic finance to pause and think of the direction it is taking”.

    http://news.bbc.co.uk/1/hi/8025410.stm

  22. Boyo — on 16th November, 2009 at 5:26 am  

    Erk. It was a joke. Indeed, perhaps you might benefit from reading this:

    http://www.amazon.co.uk/Joke-Milan-Kundera/dp/0

  23. Tom — on 16th November, 2009 at 6:14 am  

    I think you need to look at what the outcomes are of Sharia finance in countries that practice it rather than the principles you list above. You will find that they are far more unequal, with wealth concentrated in fewer hands, and a rentier economy with little industrial production – in fact the opposite of the principles listed. Whatever you want to say about “western” capitalism it has created a more productive economy and has a more equal spread of wealth than any of the arab states.

    As far as Sharia finance in the Uk goes, it is certainly beneficial to London to enable mega rich Arabs to move their oil money offshore to a more stable and transparent (even with CDOs and the Credit Crunch) system based on property rights than an unstable petro-economy in which they may be overthrown at some point in the future. Even where the old establishment has been overthrown eg Iran they remain extremley unequal, which is the basis for Ahmedinajad's support against the Tehran elite.

    In short Sharia finance has not enabled those countries who use it to compete in the modern world, and is a barrier rather than aid to economic griwth and social justice. It is however an easy bandwagon for British property developers, financiers and football clubs to jump on as a fig leaf for despots.

  24. persephone — on 16th November, 2009 at 6:32 am  

    The underlying ethos is to curb excessiveness with more 'harder' controls such as 2.5% of annual profit has to be given as 'zakaat' to charity. The Dow Jones Islamic Market Index has norms for screening & determining shariah-compliance and businesses have an independent shariah board to scrutinise activity, lay down guidelines, audit accounts and new products. The sharia board also write-offs any prohibited profits earned (eg through any unavoidable non complaint aspects) to the provisions of Islamic Principle and spend it in charitable purposes.

    Controlling excessiveness is inbuilt into the ethos from the fact that you cannot earn money on money since nominal activity has to be linked to a real project – eg non payment of instalments are not charged interest. (Some muslims believe that this 'nominal-real gap' is one of the reasons behind unhealthy consumerism which tricks people into consuming unaffordable luxuries over affordable comforts). The giving of Zakaat is to develop the spirit of self-sacrifice and curb feelings of greed to curb excessiveness.

    “ This rent or any markup established by the Sharia bank are by all effects the interest that any one of us pays in any bank.”

    Its about offering an alternative on ethical grounds and not wholly around financial aspects. They involve making other aspects of the mortgage Sharia compliant, eg making sure the money the banks use to buy the property comes from permissible sources, 2.5% profit to charity. Other differences are the larger deposits (around 30%) required than in traditional mortgages. Though it is argued that the larger down-payment actually decreases costs over time and gives a greater % of equity at a faster rate. Some say offering them leads to greater social stability, social inclusion and decreases pressure on council housing.

  25. Shamit — on 16th November, 2009 at 6:40 am  

    The Qatari Investment Authority, while in name a Qatari National Institution, serves as a private fund for the Emir's family and the Qatari Banks that have been involved the Chelsea Barracks Deal are owned by the cousin who masterminded the Emir's coup against his own dad.

    The principles sound excellent but are idealistic and have been used by the mega rich and the royalty to put a facade over their extravagance and ostentatious display of wealth.

    Those workers who would build the barracks would be working harder than any one who put the deal together but would be paid the least. Islamic Finance just like mega cooperatives while talking about equity actually support the people on top at the expense of those at the bottom of the ladder.

    The difference between cooperatives and Islamic Finance with Western Capitalism –

    Janitors in Goldman Sachs have become millionaires but that would never happen in Islamic Finance or through the cooperative model.

    Further the concept of equality is further hampered by the fact – in the Western form of capitalism – if you own a share of a company say Microsoft you would get the exact same amount of dividend per share as Bill Gates would. That is not how Islamic Finance or Cooperative (monsanto or John Lewis work. It is always invariably geared to creating wealth for the people on top.

    Finally, the affordable homes that Chelsea Barracks would create has got nothing to do with Islamic Finance but a British Law that requires all developments to have affordable homes for key workers such as police officer, nurses teachers etc —

    So this model of financing might work in an ideal world but all financing is based on profits and without profits the economic engine stops. Therefore, Islamic Finance nowadays might fit within letter of the Sharia law but definitely does not support the spirit of the law.

    The Professor is more knowledgable than I am but the way I look at it and the deals that have been made since OPEC came into being in 1970s — Islamic finance has done nothing to bring in more equality and social justice.

  26. Ravi Naik — on 16th November, 2009 at 6:41 am  

    Thank you for clarifying this. I enjoyed reading this thread. Well done!

  27. Naadir Jeewa — on 16th November, 2009 at 8:47 am  

    @Sharon:

    Best whatabouttery evar!

  28. persephone — on 16th November, 2009 at 8:57 am  

    “ I think you need to look at … etc”

    Thats better addressed to the UN I think:-

    Dr. Zeti Akhtar Aziz, Governor of Bank Negara, Malaysia was recently appointed by the United Nations General Assembly to serve on the Commission of Experts, a high-level task force of economic and finance specialists which is tasked with making recommendations for reforming the global economic system.

    The UN Commission of Experts is headed by Joseph Stiglitz, winner of the Nobel Prize for economics in 2001 and former Senior VP and Chief Economist of the World Bank who praises the Sharia-based system for focusing on fundamentals and for its superior ethics in comparison to American lending practices.

    “Both Malaysia and Britain can pave the way towards bridging Islamic financial markets between the East and the West,” Dr Zeti, in her keynote address at London’s Eighth Annual Islamic Finance Summit. In the evening, Dr Zeti received an award for her outstanding contribution to Islamic finance by Euromoney magazine’s managing director Simon Brady.

    Dr Zeti said the participation of international financial centres such as London would reinforce the trend of greater internationalisation of Islamic finance. She said this would help strengthen inter-linkages in the international Islamic finance system and the optimisation of the allocation of financial resources across borders. “Such a move will also contribute towards enhancing global financial stability through the greater diversification of risks,” she added.

  29. Naadir Jeewa — on 16th November, 2009 at 8:58 am  

    My understanding was that Islamic Finance models were hacks around the prohibition of interest.

    That said, I don't think the Islamic models are all that more helpful than any other.

    Hanafi interpretations of zakat, as practiced amongst South Asians, for example, which are generally interpreted as a percentage of tax on total wealth, seem pretty harmful as a disincentive for investment and saving. Imagine a pensioner who has to earn on their savings 2.5% plus the inflation rate per year (totalling around 5~8%) just so their life-long savings wont atrophy. This rather narrow interpretation, not shared by the other dominant schools, is repeated on charity websites (e.g. Muslim Hands), presumably to maximise revenues. This might have made sense in the old, uncertain times of poor state capacity for redistribution, uncertain currencies, low life expectancies, and high social stratification, but I don't see its use today.

    Indonesia, on the other hand, has seen much higher revenue collection and compliance by using a zakat model based on an annual income tax.

  30. Tom — on 16th November, 2009 at 9:27 am  

    Well no, not really. Thousands of people sit on the various Un comittees.

    Dr. Zeti clearly has a vested interest in the promotion of Islamic Finance and would therefore promote it. Malaysia is (using GINI co-efficients, the international comparator for inequality) much more unequal than the US or the UK so it doesn't appear to be achieving its objectives there either.

    I'd be interested to see any evidence that Sharia finance has achieved greater social justice or fairness anywhere, there just doesn't appear to be any.

  31. OOF — on 16th November, 2009 at 9:37 am  

    Suffering Women? the persecutors should be punished! Don't confuse certain cultures with Islam. Read history and facts about Islam and women and you'll be surprised at what the reality is.

    Yes, I know there will be a fair share of numpties who will let women suffer in the name of religion, but they are minority but enough to provide ammunition to the media. you might have studied propaganda at school?!

  32. OOF — on 16th November, 2009 at 9:38 am  

    Suffering Women? the persecutors should be punished! Don't confuse certain cultures with Islam. Read history and facts about Islam and women and you'll be surprised at what the reality is.

    Yes, I know there will be a fair share of numpties who will let women suffer in the name of religion, but they are minority but enough to provide ammunition to the media. you might have studied propaganda at school?!

  33. OOF — on 16th November, 2009 at 9:42 am  

    You only need to pick and choose when a religion isn't complete. I know your comment was in retaliation to the suffering women comment but your reference to picking and choosing suggests you accept Islam allows women to suffer…

    I had a few Pakistani friends in Schools and college whose culture allowed forced marriages… Islams teachings are against it… yet, the media has got everyone to believe it is one of the teachings of Islam… its a clash of culture and religion.

  34. OOF — on 16th November, 2009 at 9:48 am  

    Profit can be shared as long as there has been some element of risk in the transaction. If the bank has invested in the project rather than lent to it, then it accepts a share of losses unlike a conventional loan where they are always entitled to their money back and their profits (in the form of interest) are guaranteed.

  35. Jai — on 16th November, 2009 at 10:58 am  

    Persephone,

    Don’t like globalisation…..?

    As a fellow Economist reader, I'd like to strongly recommend the following book to you. You'll absolutely love it — it was one of the Economist's “Books of the Year” and was also shortlisted for the Financial Times/Goldman Sachs Business Book of the Year Award :

    A Splendid Exchange: How Trade Shaped the World, by William J. Bernstein.

    Summary from Waterstones: http://www.waterstones.com/waterstonesweb/produ

    “As globalisation wobbles into world crisis, a vividly written, brilliantly original history of world trade, the first for a generation is presented. '”A Splendid Exchange” is a splendid book' – “New York Times”. “A Splendid Exchange” tells the epic story of global commerce, from its prehistoric origins to the myriad crises confronting it today. It travels from the sugar rush that brought the British to Jamaica in the seventeenth century to our current debates over globalization, from the silk route between China and Rome in the second century to the rise and fall of the Portuguese monopoly in spices in the sixteenth. Throughout, William Bernstein examines how our age-old dependency on trade has contributed to our planet's agricultural bounty, stimulated intellectual and industrial progress and made us both prosperous and vulnerable.”

    It's also available via Amazon UK and Amazon.com — more details & reviews here:

    http://www.amazon.co.uk/Splendid-Exchange-Trade

    http://www.amazon.com/Splendid-Exchange-Trade-S

    The book is incredibly informative and is packed with eye-opening information.

    (India is mentioned quite a few times too, including details of the extensive dealings with the Roman Empire along with the medieval era and the colonial period).

  36. Shamit — on 16th November, 2009 at 11:09 am  

    Interestingly Malaysia's Sovereign Wealth Funds Do Not comply With Islamic Banking laws and neither does vast parts of the Malaysian economy.
    persephone – you know I have a lot of respect for you and your views. But I don't see Islamic Finance much different and Malaysia's growth has not been due to Islamic finance albeit it has the largest hub for Islamic finance

    And how is it so different? And why is it more equitable when evidence shows otherwise.
    ************************************************

    OOF:

    Earlier this year, the Saudi's and the iranians along with some others got to ammend the Universal Declaration of Human Rights saying that freedom of expression is okay as long as no one criticises Islam or its Prophet. Somehow christians, hindus, sikhs were not given the same privilege. It was organised by the organisation of Islamic Countries –

    We criticise or explore whether Jesus Christ was married or not – and the wrong things he may have done – and parody of Hindu Gods and Goddesses no matter how much the right wing hates is common knowledge- why can't we challenge anything about Islam.?

    This notion about not challenging the status quo and what the Immams define has actually led to less education, less opportunities and more hypocricy.

    Why do we not see death chants and edicts to kill those who criticise Jesus Christ but we see that when someone draws a cartoon of Mohammed? Why?

    I am no Islamophobe but the argument about culture and Islam is probably not completely valid.

  37. Shamit — on 16th November, 2009 at 11:22 am  

    before people jump on me about me hating ISlam or Muslims — my point above was about how Imams and others (especially Saudi Royalty and others) have used religious texts erroneously to stop dissent and challenge to the status quo.

    The Wahabis used religion to let school girls die in a fire — Islam never allowed it and I am sure God does not find favour with that act of Saudi Religious police however, it cannot be disputed that The Saudi Royals and their firends the Wahabi clerics have used Islam as an excuse to commit these heinous acts.

    Now, to challenge them, you have to be able to challenge their edicts as Imams and when people do they go to jail.

    Why can't we challenge what the Koran said — we can challenge the Old testament when it says when someone works in Sabath – he should be killed. No one follows it and almost 99.99% accept that it is not to be taken literally. Same goes for every other religion and no one threatens to kill anyone when someone does it.

    But when someone challenges The Prophet Mohammed or the Koran then even reasonable Muslims often feel very uncomfortable. And the nutters and the Power hungry Imams issue these fatwas.

    Why do people allow these Imams and the idiots to continue define Islam? Why did majority of Muslims across cultures agree that Universal Declaration of Human Rights be changed to say no one can criticise Islam? Why -

  38. persephone — on 16th November, 2009 at 3:25 pm  

    Shamit

    Thanks for commenting so fully. No worries about critiqueing this post – I expected that not all would agree. I thought I would get more haraguing about equal rights for women etc, which was why I cited the female Dr Zeti to show that there is some light at the end of the tunnel.

    As to people on the ground living & breathing those principles to the letter – well I am sure such social change will not happen quickly or be totally eradicated in those countries or even the west. If it was wholly eradicated then that would also be hoping for a utopia. But as the spirit of being ethical gains apace, with the credit crunch helping its path, there will be more pressure to behave ever more ethically. It has to start somewhere and I do not expect it to cure all social evils early on (particularly social indices) – even in Malaysian, where as an industry, Sharia is only c30 years old.

    I do think that in the West we are complacent in claiming a higher moral ground when we compare our social indices with other countries. After all the UK only in the last century surrendered the Empire and the fruits of the Empire (with all of its inherent social inequalities) gave the UK the bedrock to build our stability today and evolve as a fairer society.

    I am viewing these things on a business level and see it as being good for trade and country balance sheets – the loss of which could be another underdeveloped country reliant upon aid. Taking into account that the Malaysian Islamic banking assets were valued at USD 72.5 bn with an average 20% growth – at that level one wonders whether conditions would be worse without the sharia industry. It is also worth bearing in mind that the Zaakat to charity alone at 2.5% of 72.5 bn is a sizeable amount.

  39. persephone — on 16th November, 2009 at 3:27 pm  

    Jai

    Thanks for the book recommendation I will have to get a copy. Why don't you do a book review on it for PP?

  40. fugstar — on 16th November, 2009 at 4:10 pm  

    well you have to look at the social and agricultural works enabled by it, i dont think the gulf money end or the headline hopping or the 'london is the finace capital' narratives are helpful.

    sudan, east africa, south asia. Its in the society, not in the poverty porn nor the corporate PR.

  41. persephone — on 17th November, 2009 at 3:25 am  

    Fugstar

    From my view positive business movement at the moment is a welcome change. And I am unsure as to how the provenance of capital/investment can be tracked back to ensure it is from a source/society that is morally 'right'.

    But big business is facing more pressure, funnily enough including prospect of negative PR, as to their impact on social and environmental aspects.

    Why do you see gulf money and London being reaffirmed as a financial centre as unhelpful?

  42. Jai — on 17th November, 2009 at 3:45 am  

    Persephone,

    Thanks for the book recommendation I will have to get a copy. Why don't you do a book review on it for PP?

    Time restrictions make it very difficult, although I wouldn't necessarily rule it out. In the meantime, I think a number of reviewers on Amazon have already written very eloquent succinct synopses of the book, so interested readers should check those out via the links I supplied earlier.

    However, I can definitely provide some very useful further information: The author of the book, Dr William J. Bernstein, has thoughtfully supplied a 20-page-long Introduction to the book on his own website. It can be accessed here: http://www.efficientfrontier.com/files/trade/AS

    It's fascinating reading and confirms the basic point that “globalisation is nothing new, and has been going on for thousands of years”, so you should definitely browse through it when you have some spare time.

  43. fugstar — on 17th November, 2009 at 3:56 am  

    Gulf money and london are objects of the past. Thats all. I feel quite a sense of loss to watch another generation of brown clerks and technocrats go off to service gulf wealth. almost as much of a loss to see sweet little white folks get lost up the development industry.

    The uk and london needs to accept that its increasingly marginal in the general scheme of things, and be happy and content with that.

    Muslim ACAs and bwankers being arses, playing bismillah finance AND thinking they are participating in project ummahtic. oh thats just hilarious.

    money culture, and political economy are more interesting to me than technocratic browniehood.

  44. Jai — on 17th November, 2009 at 4:29 am  

    Persephone,

    Quick addendum to my previous reply above:

    Professor Jared Diamond's Pulitzer-prizewinning book Guns, Germs and Steel covers many of the same historical periods and events but from a predominantly “war and conquest” perspective. Warfare and trade are of course not necessarily mutually exclusive, but conversely, extensive commercial relationships and the bilateral dependencies & diplomatic ties that result can often mitigate the risk of conflict.

    In that sense, Professor Diamond's book and Dr Bernstein's A Splendid Exchange complement each other very well, and have a similar “big picture” theme. The latter obviously takes a more positive stance as it focuses on the historical trade networks and supply chains stretching across the world and the associated commodity & cultural exchanges that resulted (as opposed to why some civilisations were more successful and achieved greater power compared to others, which is what Professor Diamond's book analyses), but they're both absolutely superb.

    As I said, I guarantee you'll love A Splendid Exchange in particular. That PDF extract I provided in my previous reply is an excellent example of what the book is like and the wealth of exhaustively-researched, engagingly-written information it contains.

  45. Naadir Jeewa — on 1st December, 2009 at 4:48 am  

    In light of the default on payments by Dubai World, this posting is looking extremely premature – especially considering that at least $6bn of the loans were Shariah-type shukuts, with additional problem of unclear legal rules as to what happens in defaults.

    Qatar is also affected.

    As Andrew Ross Sorkin wrote:

    “One discussion was led by a British banker from Barclays who had moved to the region to create an entire Shariah-compliance team. He shared tips about various ways to create “structured products” that would pass muster with Muslim investors. (To me, the investments looked like bonds, walked like bonds and talked like bonds — but he never called them that.) Some of the bonds that Dubai World is in jeopardy of defaulting on, by the way, are Shariah-compliant sukuk. Just don’t call them bonds.”

  46. persephone — on 18th January, 2010 at 4:14 pm  

    Naadir Jeewa @45

    Seeing as the dust is starting to settle on Dubai World, perhaps your post was a little premature.

    It is not a perfect market. It’s a different market with its inherent weaknesses. Because there have been few major defaults in this market, there is little precedent for arbitrating the unique terms of these deals.

    And the other inherent weaknesses are known to those in this market.

    The prospectus for Nakheel (the property subsidiary of Dubai World) states that in the case of a bankruptcy by Dubai World or Nakheel, bondholders have no guarantee of repayment of their claims in full or at all, and that under Dubai law, no debt owed by the ruler or Govt can be recovered by re-possessing govt assets. Yet people still took this risk and invested.

    Since your post the following reports have surfaced:

    Dec 14: Central Bank of the UAE announced that it has been in consultation with Dubai Govt and reaffirmed its position that it stands behind UAE banks, including those with exposure to Dubai World and Nakheel. The Central Bank, stated that UAE Banking System is comprised of retail commercial banks only, with a strong base of retail deposits, the best banking model that weathered the current Global Financial Crisis.

    Dec 23: Dubai World has said it will continue paying interest on the roughly $22 bn debt it wants to restructure until an agreement is reached with its creditors.

    The reality is that Dubai World is a strong group with good assets, which needs time to adjust to the new, tougher international economic conditions. It is only some of its companies — mainly those in property — that have been badly affected by the international downturn.

    The assurance by the Govt of Dubai that it will help Dubai World cover its working capital expenses as long as a standstill agreement is reached, bodes well given the resources the emirate can call upon if needed.

    Most bankers are canny businessmen and as long as they are able to earn a good return on their investment, they will be willing to renegotiate the terms of the debt.

    Lastly, judging by the fact that shariah property deals have been conducted in the UK since the 80’s it is unclear why you think this is premature. The future prediction is that it will weather the current economic storm since business does not stop because of the risks inherent in being innovative or progressive.

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