Principles Based on Religious Law Insulate Industry From Worst of Financial Crisis

By Faiza Saleh Ambah
Washington Post Foreign Service
Friday, October 31, 2008; A16

JIDDAH, Saudi Arabia -- As big Western financial institutions have teetered one after the other in the crisis of recent weeks, another financial sector is gaining new confidence: Islamic banking.

This week, Kuwait's commerce minister, Ahmad Baqer, was quoted as saying that the global crisis will prompt more countries to use Islamic principles in running their economies. U.S. Deputy Treasury Secretary Robert M. Kimmet, visiting Jiddah, said experts at his agency have been learning the features of Islamic banking.

[Shariah-compliant finance (SCF) is being promoted big time by the Shariah-faithful as a cure-all and as a condition to get Gulf states oil revenues to stave off our financial crisis. Kimmitt is in the Gulf now begging for capital infusions.]

Though the trillion-dollar Islamic banking industry faces challenges with the slump in real estate and stock prices, advocates say the system has built-in protection from the kind of runaway collapse that has afflicted so many institutions. For one thing, the use of financial instruments such as derivatives, blamed for the downfall of banking, insurance and investment giants, is banned. So is excessive risk-taking.

[This is false in the extreme because everyone who knows this industry knows they deal in interest. They do so by using what are termed "nominate contracts" which are simply legal fictions for interest. For example, if you want a Shariah-compliant mortgage, one way is for the bank to "buy" your home and then "sell" it back to you for a "profit". The bank allows you to pay the "profit" off over 30 years. Guess what? The "profit" is exactly the amount that the bank would charge at current market interest rates. Read the pdf attachments here if you really want to know what this industry is all about.]

"The beauty of Islamic banking and the reason it can be used as a replacement for the current market is that you only promise what you own. Islamic banks are not protected if the economy goes down -- they suffer -- but you don't lose your shirt," said Majed al-Refaie, who heads Bahrain-based Unicorn Investment Bank.

[This is also patently false because according to Shariah, you cannot have "deposits" since those are interest-bearing debt instruments. What they do is call these "equity" investments but that also means, per Shariah, that the equity must be at risk. Thus, deposit guarantees by banks or governments are also forbidden.]

The theological underpinning of Islamic banking is scripture that declares that collection of interest is a form of usury, which is banned in Islam. In the modern world, that translates into an attitude toward money that is different from that found in the West: Money cannot just sit and generate more money. To grow, it must be invested in productive enterprises.

Sharia-compliant institutions also cannot invest in alcohol, pornography, weapons, gambling, tobacco or pork.

[Now, this is the kicker. Guess what they don't tell you about Shariah? Apostates and infidels must be put to death. According to even the most "respected" Shariah authorities, a Shariah-devout Muslim must engage in violent Jihad against the West or use his money to support such violent Jihad. See, e.g., Mufti Taqi Usmani's 1999 English translated book, Islam and Modernism, Chapter 11. In that chapter, he is asked whether a Muslim living in the "freedom" of the West might simply work peaceably to convert the infidel. Usmani issues his legal opinion: no. Violent Jihad is an absolute obligation because Islam can never be "equal" to other religions. It must dominate them. Guess what? Usmani was on the board of the Dow Jones Islamic Index for 9 years, from its founding in 1999 until 2008 when Dow Jones was embarrassed by Frank Gaffney and David Yerushalmi when their research pointed out that the most "respected" of the DJ Shariah authorities explicitly called for violent Jihad. But Usmani remains the single most authoritative voice in the SCF world. In fact, you will see below what we mean by that.]

Islamic banking has grown by about 15 percent a year since its modern inception in the 1970s, fueled by the Middle East oil boom of that decade. "There was a lot of hostility when we first started out. We were regarded with suspicion, especially by the regulatory authorities. We were an odd fish. Authorities only acquiesced when they saw the huge demand," said Dar al-Mal al-Islami's Faisal, who has been in Islamic finance since the late 1970s.

[Gee, we wonder why a rational person would object to Shariah? Have you ever seen freedom of religion in a Shariah-governed political regime?]

Work in Islamic banking by the King & Spalding law firm has grown roughly 40-fold in the past four years, according to Jawad Ali, a Dubai-based partner at the firm. The firm has 35 lawyers "who do nothing but structure sharia-compliant investment and financing on a daily basis," he said.

[King & Spalding lawyers are whores selling out their country for big fat legal fees.]

Islamic finance first sparked interest in the United States in the late 1990s. The Dow Jones Islamic Index was established in 1999, and the Dow Jones Islamic Fund, which invests in sharia-compliant companies, the following year.

[Yea, they hired Mr. Violent Jihad Usmani.]

But interest cooled after some Islamic banks were accused of financing terrorism in a lawsuit filed by family members of Sept. 11, 2001, victims, and a lot of Persian Gulf money left the United States for Europe.

[Well, well, well. Isn't that a surprise! They actually do what their Shariah authorities tell them to do!]

In 2004, the German state of Saxony-Anhalt issued a 100 million-euro sovereign Islamic bond. That same year, the first Islamic bank opened in Britain, which now has six Islamic financial institutions, including a retail bank.

Although the biggest Islamic banks are in the Persian Gulf -- Dubai Islamic Bank, Kuwait Finance House and Saudi Arabia's al-Rajhi Bank -- Malaysia and London are growing as major centers of Islamic banking as well.

Islamic institutions are not immune to ills plaguing other banks, such as corruption charges and bad investments. Differences of interpretation between sharia scholars about what is permissible and what isn't also create confusion. The sukuk market, which had doubled each year since 2004, growing to a total of about $90 billion in bonds issued, fell 50 percent this year after a Bahrain-based group of Islamic scholars decreed that most of the bonds were not compatible with sharia law.

[This is also false. They fell in value because the world's most prominent Shariah authority said he believed the Shariah bonds--Sukuk--being issued were not strictly in compliance in his view. Guess who this one authority was who was so authoritative that he could almost single-handedly destroy the entire market? Yep. Mr. Violent Jihad Usmani!]

But as banks turn borrowers away in these times of economic turmoil, Islamic institutions continue to close deals in Europe, the Gulf and the United States, bankers said. "Banks feel safer and more comfortable with us because we put down more money, more equity. We are not allowed to borrow with very little down," said Tariq Malhance, a former chief financial officer for the city of Chicago who now heads Unicorn Investment Bank's U.S. office.

[In other words, US and European bankers are going from the frying pan to the fire. Wonderful!]

And those who have been in Islamic banking for a long time now feel vindicated.

"The current financial collapse is an opportunity. The ugly side of Wall Street is exposed; it's always been there but covered by a layer of glamour that is now stripped away," Faisal said. "We are more conservative and sober in our investments. That used to be considered a handicap. Now it's considered the height of wisdom."

[Yet, the U.S. Treasury, the SEC, the Feds, and the bankers are taking the same black box approach they took to risky credit packages like sub-primes and wrapping up Shariah finance as if it didn't call for our conversion or murder. Their view is what they don't know can't hurt them. Thus, Stuart Levey, the senior Treasury official in charge of interdicting terror financing responded as follows when meeting with Messrs. Gaffney and Yerushalmi for a briefing on the Yerushalmi legal memo re the dangers of SCF: "I don't have any idea what Shariah is but I can't believe it is what you say it is." And Levey is considered one of the best at Treasury!]

Source: SANEWORKS.US

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