The Creep of Islamic Banking

JPCE – DECEMBER 2008
FEATURE

Sharia banking law lurking amid global financial crisis
-by Angelina Lin

The recent meltdown of global markets has forced the US Treasury to seek massive loans to bail out slumping financial institutions on Wall Street. But much of this money is expected to come from Arab countries flush with windfalls from high crude oil prices over recent years and who have become increasingly emboldened as lenders to demand Western compliance with Islamic sharia banking laws.

Over the past decade, sharia law has been slowly encroaching on European society. Benignly, it started with Sharia Compliant Finance (SCF), more euphemistically known as “Islamic banking,” whose practices are being adopted by some European banks. But recently, five sharia courts opened in the UK to try civil cases that range from inheritance disputes to divorce and domestic violence. They are considered officially sanctioned “arbitration courts” under British law.

It seemed, however, that this slow encroachment would not creep across the Atlantic, especially after the September 11 attacks rendered American society less prone to accepting sharia law. However, this may quickly change with the West looking towards Arab petrodollars to help correct the global financial slide.

Some economists have gone so far as to equate the recent US financial crisis with the Wall Street crash of 1929 that brought on the Great Depression. In an effort to bail out the US economy, Congress passed several measures in September, including the Emergency Economic Stabilization Act of 2008, which paved the way for the Department of Treasury to establish and run the Troubled Assets Relief Program (TARP). In short, this law authorizes the Treasury to draw down an additional $770 billion in national debt by borrowing funds from international lenders.

Since then, deputy Secretary of the Treasury Robert Kimmett has proposed that the Treasury borrow these monies from Arab sovereign wealth funds, essentially recycling petrodollars. This plan, however, could open the door of American society to “Islamic banking.”

Following a recent visit to Riyadh, Kimmit was quoted in The Washington Times as saying: “The US government is currently studying the salient features of Islamic banking to ascertain how far it could be useful in fighting the ongoing world economic crisis.”

In early November, the Treasury even put together an ‘Islamic Finance 101’ course to educate their officials in the basics of Islamic finance laws. Among those assisting in the seminar were scholars from Harvard University School of Law who were endowed with large Arab grants recently to set up a special educational program on Islamic law.

Frank Gaffney, Jr., founder and president of the Center for Public Security in Washington, D.C., who two years ago helped launch a campaign to urge state pension funds to divest from companies doing business with Iran, is now raising the alarm about Treasury’s recent moves. He notes, for instance, that Harvard Law School’s new Project on Islamic Finance received its initial funding from Sheik Bakr Mohammed bin Laden, the brother of al-Qaeda leader Osama bin Laden. His purpose in giving the university money was to do “research on the history of legal institutions in Islamic states past and present, particularly insofar as they uphold or apply the Islamic shari’a [sic].”

The Dinar Standard, which focuses on business strategies for the Islamic world, recently published a seven-page article entitled “Islamic Banking—a golden opportunity for European banks.” Majid Dawood, CEO of Yassar, a financial-consulting firm for sharia in Dubai, told the Standard, “We had expected to be at 12 percent of the global market by 2025, but now with this financial crisis, we expect to get there much faster.”

A case in point occurred early last month when British Prime Minister Gordon Brown paid a visit to Riyadh to ask the Saudis for a capital injection into the International Monetary Fund. Little was publicly disclosed about the terms and conditions to be attached to the funding.

The Islamic banking market currently holds upwards of $700 billion in assets, and European banks are eager to offer their services to manage these funds. Therefore, some in Europe are keen to reform their banking systems in an effort to attract Islamic investment.

“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,” Majde al-Refaie, head of Bahrain-based Unicorn Investment Bank, told The Washington Post in October.


BUT HOW exactly does Islamic banking work? And how would it impact the Western world?

Imagine approaching a bank that can charge fees but not interest on loans, and cannot invest in speculative or risky ventures, nor market ‘debt,’ and nor loan to immoral businesses. Sounds reasonable so far…

Yet also suppose five children – three daughters and two sons – are seeking arbitration in a dispute over an estate inheritance. The court decides to divide the estate up between the five, however both sons receive twice as much as their sisters. This was the result of a sharia court case in Britain recently.

On the surface, Islamic banking is merely an awareness of the ‘dos and don’ts’ allowed under the Islamic legal code. A sharia compliant financial institution is not allowed to charge interest, as that is considered exploitation. Speculative or high-risk investments are strictly prohibited, as well as investments in ‘unclean’ industries such as alcohol, gambling, pork, and so forth. Yet as innocuous as all this may seem, the ramifications are indeed serious.

“Sharia is a reactionary-to-the-core medieval Islamic doctrine that claims control over every aspect of every Muslim’s life,” Alex Alexiev, one the world’s leading experts on Islam, has cautioned. “Sharia… is a god-given Islamic law that is immutable, indivisible and mandatory for Muslims to follow in all aspects of life. It is definitely not a smorgasbord for which you can pick and choose what you like, when you like it. So to talk about sharia finance as something apart from sharia law is simply dishonest.”

Christopher Holton, in his on-line article Financial Jihad, spotlights two of the world’s most highly consulted scholars on Sharia Compliant Finance: Mufti Taqi Usmani, who was formerly on the Dow Jones Islamic Index board; and Sheikh Yousuf al-Qaradawi, founder of the International Association of Muslim Scholars.

“The purpose of jihad aims at breaking the grandeur of unbelievers and establish that of the Muslims,” Usmani has publicly stated, according to Holton.

Meanwhile, al-Qaradawi, a professed member of the Muslim Brotherhood and apologist for radical Islamist militias who has been barred from entering the U.S, calls sharia compliant finance, “jihad with money — Allah has ordered us to fight enemies with our lives and with our money.”


IN AN AGE of oil-dependency, and increasing globalization and trade, it is becoming more difficult for Western democracies to hold off the encroachment of Islamic banking laws, and with it the creep of the wider sharia code. However, such changes would carry huge pitfalls for free societies and may also be unconstitutional in the US, since it undermines the separation of church and state enshrined in the “establishment” clause of the First Amendment.

Some concerned observers say world is watching a pincer movement unfold, whereby regimes wedded to the propagation of Islam combine hard and soft power to wage an all-out struggle against the West. While quietly supporting violent Islamist groups, they are also using the world’s dependence on oil to wage economic warfare; and infiltrating Western culture by pouring money into our most prestigious academic institutions such as Harvard, Oxford and Cambridge.

Peter Huessy, president of GeoStrategic Analysis, warns: “The fear… is we are going off a cliff toward hard-left European socialism and neutrality, which in its cowardice and incapability of protecting and defending its liberty and culture, is sliding toward an abyss of appeasement and cultural diversity where sharia law runs parallel with the laws handed down from the Magna Carta and where the defense of what freedom and liberty remain becomes a bother and a pain.”

The silence of brokenness

To care is to be disappointed,
To care is to be devastated.
The heart of it all,
was crushed by the fall.
Guaranteed soul destruction
Guaranteed total demolition
of the organ that keeps
everything a beat
How much simpler to then close it off
To lock it away in a box
Shut out from the sun's burning rays
And the beauty that fills the days
Closed to the brutal coldness of humanity
Closed too, to the beauty of simplicity
Instead, pour out into the deafening silent abyss
That has for times untold listened to all amiss
The wineskin that has counted every tear drop
The Hand that can make it all stop
But it won't, because to pour out
Is the only way to appease doubt
Until one is empty and drained
Then it will come the late summer rain
Onto the broken earth of the broken heart
that has been tilled and plowed, all exposed sinews apart
Can finally absorb the compassion need
and the multitudes with grace to feed
To fill up with joy
only to be destroyed
again lest the poor soul believes
it is he that relieves.
And so in this constant state
That mercifully does not abate,
The soul will delight in loneliness
and the perpetual silence of brokenness.