Shariah Finance Watch!

Yea, what he said... another good one.

I was hoping that this would be a site I could refer to Finance journalists I know who are writing about the proposal to have Sharia Compliant Finance (SCF), in our town, in this case SCF Bonds proposed to be introduced into Hong Kong -- proposals these finance journos tend to oppose, but for various practical tax-related reasons. I was hoping the site would provide some further reasons why SCF is not a good idea: ie the broader dangers of Sharia... ie, Stealt Sharia, via SCF....

Unfortunately this is not the site for that: it's rather a hodge-podge, I fear. The first article I came across when I visited was about some IslamicArt Fair in the UK, which is to go from 14-18 July, but which is written as if it's already over, which is generally very positive about the Fair, and which seems to bear scant relation to SCF.

The FAQ's about SCF are not very powerful and don't provide any further useful info, as far as I can see, to what financial commentators are already saying (here, at least, in HK). That's a pity, and it would be good if they could. Why? Because alerting such journalists to the broader issues of Sharia would go to the heart of what sites like this -- and JW -- are about: informing the public about the dangers of stealth jihad, in this case via stealth SCF, stealth finance.... ("stealth compliant finance"?...)

This is an extremely important Web site, a wealth of information and links on a complicated topic that has ominous implications. For instance, consider the Islamic Finance Project at Harvard, which recently sponsored an extremely well financed 'Forum' on Islamic finance with a keynote address by Robert Merton (in which he admits he knows very little about 'Islamic finance in the first paragraph of his heady speech) with a 'banquet address' by the dean of the divinity school. The report on the Forum itself is bizarre--debates about 'authenticity' of law regualting 'Sharia compliant' finance and such like, and other extremly technical problems with Sharia finance. These debates, of course, only make sense if one assumes that Sharia itself, not merely 'Sharia compliant finance' (which international banks embrace wholeheartedly in the hope of attracting a portion of the hundreds of billions of dollars transferred annually to institutions and individuals attracted to that kind of finance) is 'authentic' or 'legitimate'. I cannot fathom how scholars at Harvard can let this assumption, and all that it implies, slide past them like like a harmless, innocent child--a cultural perspective deserving no critical examination, just another way to look at law--no big deal.

The statement of the mission of the Islamic Finance Project seems to make this assumption as well:

"The Islamic Finance Project (IFP) is the continuation of the Harvard Islamic Finance Information Program (HIFIP), which was established by the Center for Middle Eastern Studies in 1995. IFP is now part of the Islamic Legal Studies Program (ILSP) at Harvard Law School. It aims to study the field of Islamic finance from the legal and shari'a points of view by analyzing contemporary scholarship, inducing collaboration among scholars within and outside the Muslim world, and increasing the interaction between theory and practice in Islamic finance."

What does it mean to "study the field of Islamic finance from the legal and shari'a points of view"? Does this imply that 'studies' assume the legitimacy of Sharia itself? Is anyone at Harvard questioning the implications of this for womens' rights, freedom of conscience, the legal and moral equality of all persons irrespective of religion or lack thereof?

Mohammed's book, the koran, goes into some detail about how a man's estate should be divided amongst his family when he dies. Sadly for the credibility of islam, there are a few gaping holes. For example, if he dies and leaves a wife, 2 parents and 3 daughters, their shares would be:

Wife 1/8 = 3/24
Daughters 2/3 = 16/24
Father 1/6 = 4/24
Mother 1/6 = 4/24

These total 27/24 (!!!!!!!!!)

Which means either:
1) The Creator of the universe couldn't do fractions that a 10 year old child could do.
2) Mohammed made the whole thing up.

I know which my money is on.

My wife recently bought a car, against my wishes. She called the bank, got her own loan in her name, and then went to the dealer and bought a car.

I gave the issue a lot of thought, and came to the following conclusion: although I was a little ticked off that she bought a car against my wishes, I am extremely proud to be a citizen of a country where a woman doesn't have to ask anyones permission to do that!!

A woman could never do that at a "shariah" bank.

Our banking system is designed to loan the maximum amount of money to the maximum amount of people, for the benefit of all.

Shariah banking, on the other hand, is designed to use finances to force islam down everyone's throat.

Meeker, you may find the work of Timur Kuran more suitable.

Hugh Fitzgerald commented on back in February:

From an article, or rather, a book-review and summary by Daniel Pipes of Professor Timur Kuran's indispensable study, "Islam and Mammon":

"Islamic economics increasingly has become force to contend with due to burgeoning portfolios of oil exporters and multiplying Islamic financial instruments (such as interest-free mortgages and sukuk bonds). But what does it all amount to? Can Shari'a-compliant instruments challenge the existing international financial order? Would an Islamic economic regime, as an enthusiast claims, really imply an end to injustice because of "the State's provision for the well-being of all people"?

To understand this system, the ideal place to start is "Islam and Mammon," a brilliant book by Timur Kuran, written when he was (ironically, given heavy Saudi backing for Islamic economics) King Faisal Professor of Islamic Thought and Culture at the University of Southern California.

Now teaching at Duke University, Kuran finds that Islamic economics does not go back to Muhammad but is an "invented tradition" that emerged in the 1940s in India. The notion of an economics discipline "that is distinctly and self-consciously Islamic is very new." Even the most learned Muslims a century ago would have been dumbfounded by the "Islamic economics."

The idea was primarily the brainchild of an Islamist intellectual, Abul-Ala Mawdudi (1903-79), for whom Islamic economics served as a mechanism to achieve many goals: to minimize relations with non-Muslims, strengthen the collective sense of Muslim identity, extend Islam into a new area of human activity, and modernize without Westernizing.

As an academic discipline, Islamic economics took off during the mid-1960s; it acquired institutional heft during the oil boom of the 1970s, when the Saudis and other Muslim oil exporters, for the first time possessing substantial sums of money, provided the project with "vast assistance."

Proponents of Islamic economics make two basic claims: that the prevailing capitalist order has failed and that Islam offers the remedy. To assess the latter assertion, Kuran devotes intense attention to understand the actual functioning of Islamic economics, focusing on its three main claims: that it has abolished interest on money, achieved economic equality, and established a superior business ethic. On all three counts, he finds it a total failure.

1) "Nowhere has interest been purged from economic transactions, and nowhere does economic Islamization enjoy mass support." Exotic and complex profit-loss sharing techniques such as ijara, mudaraba, murabaha, and musharaka all involve thinly disguised payments of interest. Banks claiming to be Islamic in fact "look more like other modern financial institutions than like anything in Islam's heritage." In brief, there is almost nothing Islamic about Islamic banking which goes far to explain how Citibank and other Western majors host far larger Islam-compliant deposits than do the specifically Islamic banks.

2) "Nowhere" has the goal of reducing inequality by imposition of the zakat tax succeeded. Indeed, Kuran finds this tax "does not necessarily transfer resources to the poor; it may transfer resources away from them." Worse, in Malaysia, zakat taxation, supposedly intended to help the poor, instead appears to serve as "a convenient pretext for advancing broad Islamic objectives and for lining the pockets of religious officials."

3) "The renewed emphasis on economic morality has had no appreciable effect on economic behavior." That's because, in common with socialism, "certain elements of the Islamic economic agenda conflict with human nature."

Kuran dismisses the whole concept of Islamic economics. "[T]here is no distinctly Islamic way to build a ship, or defend a territory, or cure an epidemic, or forecast the weather," so why money? He concludes that the significance of Islamic economics lies not in the economy but in identity and religion. The scheme "has promoted the spread of antimodern currents of thought all across the Islamic world. It has also fostered an environment conducive to Islamist militancy."

Indeed, Islamic economics possibly contributes to global economic instability by "hindering institutional social reforms necessary for healthy economic development." In particular, were Muslims truly forbidden not to pay or charge interest, they would be relegated "to the fringes of the international economy."

In short, Islamic economics has trivial economic import but poses a substantial and malign political danger."

This is a fine site on a largely unexplored topic. For instance, even putting aside other aspects of Shariah law, such as stonings and amputations, what are the financial implications of institutions adapting Shariah compliant mutual funds, et al? If they are going to be interest free, when why would any Infidel (even a dhimmi) with half a brain invest there? How about institutions that offer 'interest free' loans (that actually charge upfront fees for borrowing) - while that may be as attractive to Infidels as to Mohammedans, point remains that if such institutions are to be FDIC insured, they'd be a very disguised Jiziya - where Infidels at large would be helping maintain Mohammedan spending gone hayware.

Also, will such institutions/funds be available to Mohammedans only? If so, the foundation of Jim Crow laws in our financial institutions will have been laid. Can we also have exclusively Christian funds, or Jewish funds, or Hindu funds? How about all White funds, or all Black, or all Lesbian? The possibilities are endless.

Heroyalwhyness: Thanks! That's most useful and I've passed on to the journos here who are taking on the HK-government's misguided (but, it seems, trendy) efforts to institute Sharia-compliant Bonds in Hong Kong.

*Very* interesting background, thanks again!

Regds,
Meeker
Your humble JW-er in Hong Kong....

Infidel pride:

Here's a (highly) simplified version of difference between normal interest-bearing loans (eg bonds) and Sharia-compliant loans/bonds (let's call them Sharia Compliant Bonds, or SCBs).

(A) The "interest" version: I loan you $100 (eg, buy a bond from you) and you pay me 10% interest, plus the principal, giving me back a total of $110, in due course. This gives rise to interest income of $10 in my hands, which here in Hong Kong is tax free.

(B) The Sharia version: you "sell" me something for $100 and you "buy" it back from me for $110. This gives rise to a "profit" of $10 in my hands which is taxable.

The basis on which the proposal for SCBs in Hong Kong has been attacked is that the HK government -- in order to make the SCB competitive with the normal tax-free interest income -- needs to find a way to make the SCB version tax-free too. In short, it has to find a way to give a *profits* tax break.

It didn't take two ticks for the smart finance guys to see that this would lead to a loophole big enough to drive a truck through: that it would not take much for companies to structure many vehicles as SCBs, thus wreaking havoc with HK's profits tax base. This is the basis on which they have attacked the HK government's proposals.

This is all very true. The other, broader and in my mind more important issue that I wanted these journos to see was the one highlighted in the information by Hugh, above, posted by "heroyalwhyness" --- ie, the one we're all familiar with on this site, the insinuation of Sharia into our legal system via SCBs; and the great danger that such a precedent would be…

Why is HK, of all places, contemplating this? It's no longer a part of what's now the Ummah Kaliphate (UK) - it's completely Chinese territory, with some British holdovers. And it's not like Beijing normally tries to pander to its Hui and Uighur groups, which would be the only source of Mohammedans in HK, unless they happen to import parts of the ummah from Pakistan.

Normally, the last thing governments - even Conservative ones - want to do is puncture their tax base: they may want to cut taxes for other reasons, but even they aren't in favor of such tax loopholes. What's the excuse of the HK government?

Infidel Pride: why indeed??

It's a HK-government decision, though no doubt it would have been run by the fellas up in Beijing.

What seems to be driving it is more mundane: this government's infatuation with the concept of being a "hub" for all manner of things. In the last year or so, we've had the government proposing HK as a “hub” for: Chinese traditional medicine, for fine wines, for amusement parks, for the cruise-ship industry,... you name it, the government wants us to be a “hub” of it, as part of being “Asia’s world city”….. Part of this “hub” obsession is to become a hub of Islamic finance in Asia. Many have thought that Malaysia or Indonesia might be better suited.

Anyway, there are some formidable practical issues standing in the way. My concern, as might be shared by others on this website, was for the precedent this would be for a part of Sharia law to insinuate itself into our common-law society, a precious legacy of the British. You know, thin end of the wedge and all that…..