Christian Life 

Banking: the future is Halal


Your bank manager may agree – but will your loan pass the test of an Islamic scholar? Philip Wren reveals ‘jihad with money’ through Shari'a finance. Never mind who pays the piper, who is the piper?


Islamic Development Bank
Sharia financeUNTIL recently few of us had heard of the concept of shari’a finance. Suddenly it has become a major player in global economics.

Not because the sums of money involved are large – relative to the world economy they are small – but due to the desperate need of Western nations to borrow money to bail out their collapsing economies. Shari’a finance is destined to play an increasingly important role in the banking and financial structures of western nations.

The flood of oil revenues and the resurgence of Islamic fundamentalism have made shari’a finance a huge growth sector in the last couple of decades. It is a development of shari’a law, which stipulates that money must not be used for purposes incompatible with Islam. To the West it is presented as a more ethical form of finance.

The interpretation of shari’a law translates into a different approach to banking. Shari’a banking prohibits investing in things seen as immoral such as casinos, alcohol, pornography and weapons of mass destruction. It aims at greater social justice by sharing risk and reward. It bans the selling of what a person doesn't own. So practices such as short-selling and engaging in contracts containing excessive uncertainty are forbidden. Traditional insurance is ruled out. In its place Islamic banks have developed a system called 'takaful', in which people pool risk. Giving to charity is mandatory. Called 'zakat', 2.5% of revenue is given to Islamic charities. If shari’a banking were to become the global norm this would translate into very large sums of money.

The most distinct difference between western banking and Islamic banking is the ban on charging interest on loans. Instead of loans Islamic banks offer Sukuk or Musharaka. Sukuk is a system whereby the person needing to raise finance sells a proportion of an asset on which the buyer is then entitled to receive rent. Musharaka is a partnership with profit and loss sharing.

Halal finance

Gordon Brown at Islamic Finance and Trade Conference

Gordon Brown and audienceTo ensure shari’a compliance, banks must hire shari’a scholars to approve each product and practice as 'halal'.

These scholars need to be steeped in the Qur'an, shari’a law and have mastered finance. As would be expected there is a shortage of such scholars. The few there are can command six figure sums for just one consultation. The problem is compounded by linguistics. Most scholars work in Arabic, but as more banks seek to be shari’a compliant there is a need for fluency in English and French.

An example of when a bank would require the expertise of a shari’a scholar might be the purchase of an aircraft. A sukuk could be issued in which the Islamic financier purchases a share in the aircraft. The airline would then pay him a rent for the use of that share. This type of deal is acceptable under Islam. But would the deal still be acceptable under Islam if alcohol were served on the aircraft?

Shari’a finance deals are becoming more common. Ford Motor's sale of Aston Martin for $848m was mainly funded by Oar, a Kuwait-based Islamic bank. The sale required shari’a-compliant financing. A shari’a-compliant private equity firm based in Bahrain owns Caribou Coffee, America's second-largest speciality coffee chain after Starbucks. Many other major corporations are looking to the Middle East to raise finance.

The borrower is servant to the lender.

In October 2008 the deputy governor of the Bank of England, Charlie Bean, warned that the pain is just beginning, calling the situation the 'largest financial crisis of its kind in human history'. In a desperate attempt to fend off the inevitable the UK government is trying to borrow its way out of recession.
The government hopes that much of the money will come from the oil rich countries of the Persian Gulf. Instead of bonds, which are the traditional way for Governments to raise money, the British Government is developing a shari’a compliant Sukuk. "shari’a finance does not exist in isolation from shari’a law"
Money needs to come from somewhere. Those with the money are the ones who dictate the terms. The Gulf states have already pledged to loan money to help the Western economies. But this money will come with strings attached.

One of the main strings will be pressure on financial institutions to open themselves up to shari’a-based finance. This may not seen a big deal as many banks have already jumped on the shari’a finance bandwagon. However we must keep in mind that shari’a finance does not exist in isolation from shari’a law – it is part of what Muslims understand as a total theocratic system. The exponents of shari’a finance believe that it is their duty to impose the shari’a system on all people religious and secular alike.

Jihad with money

Shari’a is a unified, indivisible program to which all faithful Muslims must adhere comprehensively. Shari’a finance is seen as a step towards moving all nations towards acceptance of the Islamic system. Sheikh Qaradawi, one of the creators of the modern shari’a banking system, calls it "Jihad with money, because God has ordered us to fight enemies with our lives and our money." The Qur'an commands Muslims to use money to spread Islam. "You... should strive for the cause of Allah with your wealth and your lives." Surah 61:10-11, "The (true) believers are only those who... strive with their wealth and their lives for the cause of Allah." Surah 49:15

It is the stated aim of the British Government to make London the global centre for shari’a finance. With government encouragement London has today more banks offering sharia-compliant services than anywhere else in the world. This desire to make Britain shari’a-friendly is I believe one reason why the government has given shari’a courts the full status of arbitration tribunals with legal powers. Once Islam has a foot in the door it will exploit every opportunity.

Saudi Arabia and Jordan are pushing for the acceptance by governments world wide of shari’a blasphemy laws. The Islamists insist that free speech must not allow the slander, libel or defamation of shari'a, or other aspects of their faith. It is to be expected that, as greater influence is gained over our government, moves will be made to introduce some form of revised blasphemy law. When this is adopted we will no longer be allowed to even discuss the Muslim faith and certainly not hint at criticism. The straightforward proclaiming of the Christian Gospel could be deemed a contradiction and affront to Islam.

Moral high ground

Islam claims the moral high ground as it looks at our broken western society. Drunkenness, immorality, broken families and child abuse are just some of the things Islam sees and condemns in the 'Christian' west. Back in the early seventies I had a Muslim friend from Bombay, as it was known at the time. He didn't want to know about Christianity. He said that he had been to the cinema in Bombay and seen what the 'Christian' west was like. As far as he was concerned it had nothing to offer compared to Islam.

One of the fruits of our broken society is the present credit crunch.

Unregulated and out of control, the banking system has become the medium for greed and self interest. The population, quick to blame the bankers, is equally guilty, as it connives with the something for nothing culture built on money unbacked by real resources. Governments are most to blame as they seek to meet the aspirations of the voters. They debauch the currency by borrowing but never intending to repay, using controlled inflation to eventually deal with the debt and allowing money creation to go unchecked. Will our Governments in the West recognise that the system of defrauding the population by continually devaluing the currency has hit the buffers? The world is in real financial trouble with a risk that major trading nations will face bankruptcy as lenders lose confidence in their ability to repay.

Islam offers an alternative morally accountable financial system. It offers discipline, the lack of which has led to our present problems. Will the world come to see shari’a as the way forward to build the long-term stable financial future? Through relying on Islamic funds to bolster failing economies our governments may have no choice.
Once shari’a is accepted as the morally superior financial system, we will be well on the way to accepting shari’a as the way to heal our morally bankrupt, broken and fragmented western society.
"when there are powers that could act, but choose not to prevent it, we conclude that the crisis was intended"

Government by crisis

Many years ago I came across the concept of government by crisis. The principle being that governments recognise that there are policies, which they wish to bring in, but the population at large is not ready to accept. The way round this problem is to create a crisis. The government then presents its previously unacceptable policy as a solution to the crisis. The population, relieved that there is a way out, accepts the new policy. It may even praise the government for its decisive intervention. Does this really happen? From my observation of events over the last 30 years I would say yes, it does happen, although sometimes things appear to go wrong.

A current crisis being used to restrict, control and develop global government is global warming. The globe is warming up but the extent to which it is being influenced by man's activities is much less clear. Even the consequences of global warming are far from established. What can be verified is that a few centuries ago the earth was at least 3 degrees warmer than at present and life did not come to an end. Yet this is not allowed to be a subject for open to debate. We are told as fact that global warming will bring disaster and that we must all take certain actions to avert the consequences. Those who dare to disagree are ridiculed.

The global financial crisis, resulting from the irresponsible expansion of credit, was predictable and predicted. Therefore, when there are powers that could act, but choose not to prevent it, we conclude that the crisis was intended. The initial results that we see are greater control of financial institutions by government. In time there will be greater control of governments through increasing debt.

The present Credit Crunch crisis, although probably engineered by those who covet more and more power, will prove the beginning of the downfall and destruction of the western world. From now on Islam will rise in ascendancy over the kingdoms of this world. This is a matter that will require of us all a great deal of prayer and discernment in the days ahead. Prayer that we will remain faithful when surrounded by deception.


first published in Sword magazine: reproduced with permission


Philip Wren, 15/03/2010

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