Sharia Alert, Eurabia Alert, and an update on this story. "UK Treasury paves way for Islamic bonds," by George Parker, Lina Saigol, and David Oakley for the Financial Times:
The government will step up preparations this week for the launch of sharia-compliant bonds, known as sukuk, as it seeks to turn London into the world centre of Islamic finance.
Kitty Ussher, the Treasury minister, will tell City leaders she is launching a three-month consultation process and could use next spring’s Budget to put in place any legal changes that might be needed to launch the first western government sukuk.
Ms Ussher believes that the scheme will entrench London as “a global gateway to Islamic finance” and help Britain’s Muslims, who sometimes struggle to find sharia-compliant retail products such as mortgages.
The bonds could be used as vehicles to allow Muslims in Britain to invest in National Savings products through banks and post offices.
Islamic bonds are structured to pay profits or rent from an underlying asset or business, rather than interest, which is outlawed under sharia religious law.
Unlike conventional bonds, sukuk are akin to Islamic “investment certificates” representing ownership in the underlying asset. Returns are paid to investors in line with their proportional ownership.
The sukuk market has grown dramatically in the past five years. Nearly $40bn (£19.1bn) of these bonds have been issued this year, from virtually nothing in 2001.
On Wednesday, Ms Ussher will tell a high-level group of City executives – assembled by the Treasury to develop London’s financial services sector – that there is no question of her going cold on the project.
There had been speculation that the government was backing away from the scheme after the departure of its architect, Ed Balls, the former City minister, from the Treasury in June.
One member of the Treasury’s committee of experts on Islamic finance, which is advising the government on structuring and pricing the bonds, said: “The project did lose momentum after Ed Balls left, and it’s still in the early stages. It’s not a done deal.
“Doubts have been expressed over whether it would attract investors and the complexities of the legislation needed.”
[...]
The competition for business is fierce, however, with the Middle East increasingly seen as an attractive location to set up operations because of its oil wealth.
London’s share of Islamic funds, which invest in only sharia-compliant products, has dropped by almost a third in the past five years as more of them move to the Middle East, where they see big potential for business.
Tthe attracitveness of such a product will be expresses in percentage figures which are not interest rates, of course.
Islam seems to mutilate abstract thinking.
"Ms Ussher believes that the scheme will entrench London as “a global gateway to Islamic finance” and help Britain’s Muslims, who sometimes struggle to find sharia-compliant retail products such as mortgages."
A global gateway to financing Islamic terrorism.
Pay interest or pay profits. Is there a real difference?
Hypocrites.
As i understand it , the return is based on the value of the assets and profits of the business. So it's in the interest of the muslim business owner to decrease his profits and asset value, while actually incrteasing both by hiding the profits. Nice sheme to screw the investors.
Enter at your own risk.
The Muslim mind is always divided on everything, so calling 'interest' profit satisfies their perennial denial of truth with semantics. It won't work. Western buyers see through the foolishness and will stay away from this market ploy. Sharia compliant investments wil decline.
Put them into 'junk bonds' category.
From the inventors of the zero..............
An on-line summary of the contents of "Islam and Mammon" by Professor Timur Kuran:
"The doctrine of "Islamic economics" entered debates over the social role of Islam in the mid-twentieth century. Since then it has pursued the goal of restructuring economies according to perceived Islamic teachings. Beyond its most visible practical achievement--the establishment of Islamic banks meant to avoid interest--it has promoted Islamic norms of economic behavior and founded redistribution systems modeled after early Islamic fiscal practices.
In this bold and timely critique, Timur Kuran argues that the doctrine of Islamic economics is simplistic, incoherent, and largely irrelevant to present economic challenges. Observing that few Muslims take it seriously, he also finds that its practical applications have had no discernible effects on efficiency, growth, or poverty reduction. Why, then, has Islamic economics enjoyed any appeal at all? Kuran's answer is that the real purpose of Islamic economics has not been economic improvement but cultivation of a distinct Islamic identity to resist cultural globalization.
The Islamic subeconomies that have sprung up across the Islamic world are commonly viewed as manifestations of Islamic economics. In reality, Kuran demonstrates, they emerged to meet the economic aspirations of socially marginalized groups. The Islamic enterprises that form these subeconomies provide advancement opportunities to the disadvantaged. By enhancing interpersonal trust, they also facilitate intragroup transactions.
These findings raise the question of whether there exist links between Islam and economic performance. Exploring these links in relation to the long-unsettled question of why the Islamic world became underdeveloped, Kuran identifies several pertinent social mechanisms, some beneficial to economic development, others harmful."
[Timur Kuran is Professor of Economics and Law, and King Faisal Professor of Islamic Thought and Culture, at the University of Southern California. His books include Private Truths, Public Lies.]
Comment:
Amazing, isn't it, that Timur Kuran can hold the "King Faisal Professorship." Somehow he managed to get appointed -- an act of defiance by the Economics Department at U.S.C.? -- and the Saudis must be gritting their teeth in fury.
Let them grit.
If you ask me ( and I'm not in finance ) these instruments could be exploited by persons wishing to launder money or rip people and goverments off. The rules around them would be complex and difficult to define and this sort of thing will be used by persons with ulterior motives or the criminal element. The arcane rules around this type of thing will provide cover for those who are up to no good, Islamic or otherwise.
Also, any non believer wanting to hold assets with transparent and efficient returns will avoid these things.
Islamic societies, among their many social problems, are extremely corrupt. If these new "Sharia-friendly" laws go into effect, look for massive financial corruption and growing resentment and anger by ordinary British citizens, many of whom already resent the special treatment of Muslims by the government.
Dhimmi greed is only surpassed by dhimmi stupidity. Accomodating sharia compliant financial instruments only furthers the campaign for global sharia. When the Islamists own enough of the UK they won't be asking they'll be telling the UK to institute Sharia Law.
A sukuk in the West su-ucks. Unless this scheme is a way to monitor things but I doubt it.
"profits or rents from an underlying asset or business..."
We call that interest. I can't wait for the legal directive telling everyone to pretend it's not interest. The press, as usual, is already fully on board.
It sounds like these investments are more like a stock or equity. If they pay dividends instead of interest, this is nothing new to the investment market. I don't know how you can call it a "Bond" (fixed income) if it does not pay interest.
--
CT yank
CTYankee,
Don't tell anyone, but dividends can be expressed as a percentage of the stock price.
If you ask me ( and I'm not in finance ) these instruments could be exploited by persons wishing to launder money or rip people and goverments off. The rules around them would be complex and difficult to define and this sort of thing will be used by persons with ulterior motives or the criminal element. The arcane rules around this type of thing will provide cover for those who are up to no good, Islamic or otherwise.
Posted by: A_Plague_on_Both_Houses
A sukuk in the West su-ucks. Unless this scheme is a way to monitor things but I doubt it.
Posted by: ISLAMSFORLOSERS
We can hope this may actually be a brilliant scheme by the UK to monitor more closely the movement of funds to / from islamic countries. I was the manager for six years of the anti-money laundering unit of a major Canadian bank. It is, of course, much easier to trace and follow funds when there is a paper trail. And believe me, banks and law enforcement are very vigilant when it comes to suspected money laundering.
Time will tell.
From the article:
When it comes to stemming the tide of creeping implementation of sharia, London has lost its Balls.
This offers tremendous opportunities for Islamic stockbrokers, and the underlying businesses being financed by these bonds, to hide profits and divert them to Hezbollah, Hamas, and al-Qaeda. Westerners are onto the "charity" angle, so this is the next phase of terror finance.
Just as Islam's most noteworthy contribution to the Olympic movement was the Munich massacre, it's greatest contribution to international banking was BCCI:
"The Bank of Credit and Commerce International (BCCI) was a major international bank founded in Pakistan in 1972. At its peak, it operated in 78 countries, had over 400 branches, and claimed assets of $25 billion.
BCCI became the focus in 1991 of the world's worst financial scandal and what was called a "$20-billion-plus heist." -Wikipedia
Does this mean that TPTB are eager to change the currency to Arabian riyals?