Canada's Banks working with Islamists to cash into Muslim fears

January 25, 2008

Banks are helping sharia make a back-door entrance

TAREK FATAH
The Globe and Mail

It seems only yesterday that Premier Dalton McGuinty declared: "There will be no sharia law in Ontario." Many of us, who witnessed the medieval nature of manmade sharia laws in our countries of birth, heaved a sigh of relief back in September of 2005. We thought this was the end of the attempt by Islamists to sneak sharia into a Western jurisdiction. We were wrong.

The campaign to introduce sharia is back. Last time, the campaign took a populist approach, invoking multiculturalism. This time, the pro-sharia lobby is dangling the carrot of new niche markets and has the backing of Canada's major banks. Such icons of the corporate world as Citibank NA, HSBC Holdings PLC, and Barclays PLC have endorsed sharia banking and have started offering Islamic financing products to a vulnerable Muslim population.

In May, 2007, The Globe reported that "Several Canadian financial institutions are preparing sharia-compliant mortgages, insurance, taxi licensing and investment funds to help serve the country's fastest-growing part of the population." Recently, the Toronto Star's business section reported that an unnamed bank may offer sharia loans as early as this summer; Le Journal de Montreal disclosed that Canada Mortgage and Housing Corporation(CMHC) was also getting in on the act. Stephanie Rubec, spokesperson for the CMHC, said the Crown corporation had launched a tender worth $100,000 to study Islamic mortgages for Muslim Canadians. Could she be oblivious to the fact that almost all Muslim Canadians currently have home mortgages through banks and don't feel they are living in sin? In fact, CMHC has gone a step further: It has quietly entered into a partnership with a Saudi company, AaYaan Holdings, to develop sharia-compliant mortgage-lending systems.

The origin of Islamic banking has its roots in the 1920s, but did not start until the late 1970s and owes much of its foundation to the Islamist doctrine of two people — Abul Ala Maudoodi of the Jamaat-e-Islami in Pakistan and Hassan al-Banna of the Muslim Brotherhood in Egypt. The theory was put into practice by Pakistani dictator General Zia-ul-Haq who established sharia banking law in Pakistan.

Proponents of sharia banking rest their case on many verses of the Holy Koran that outlaw usury, not interest.

Verses that address the question of loans and debts include:

* Al Baqarah (2:275): God hath permitted trade and forbidden usury;
* Al Baqarah (2:276): Allah does not bless usury, and He causes charitable deeds to prosper, and Allah does not love any ungrateful sinner.

Every English-language translation of the Koran has translated the Arabic word riba as usury, not interest. Yet, Islamists have deliberately portrayed bank interest as usury and labelled the current banking system as un-Islamic. Instead, these Islamists have created exotic products with names that are foreign to much of the world's Muslim population. This is where they mask interest under the niqab of Mudraba, Musharaka, Murabaha, and Ijara.

Two authors, both senior Muslim bankers, have written scathing critiques of sharia banking, one labelling the practice as nothing more than "deception," with the other suggesting the entire exercise was "a convenient pretext for advancing broad Islamic objectives and for lining the pockets of religious officials." Why Canadian banks would contribute to this masquerade is a question for ordinary Canadians to ask.

Muhammad Saleem is a former president and CEO of Park Avenue Bank in New York. Prior to that, he was a senior banker with Bankers Trust where, among other responsibilities, he headed the Middle East division and served as adviser to a prominent Islamic bank based in Bahrain. In his book, Islamic Banking — A $300 Billion Deception, Mr. Saleem not only dismisses the founding premise of sharia and Islamic banking, he says, "Islamic banks do not practise what they preach: they all charge interest, but disguised in Islamic garb. Thus they engage in deceptive and dishonest banking practises."

Another expert, Timur Kuran, who taught Islamic Thought at the University of Southern California, mocks the very idea. In his book, Islam and Mammon: The Economic Predicaments of Islamism, Prof. Kuran writes that the effort to introduce sharia banking "has promoted the spread of anti-modern currents of thought all across the Islamic world. It has also fostered an environment conducive to Islamist militancy."

Dozens of Islamic scholars and imams now serve on sharia boards of the banking industry. Moreover, a new industry of Islamic banking conferences and forums has emerged, permitting hundreds of sharia scholars to mix and mingle with bankers and economists at financial centres around the globe. In the words of Mr. Saleem, who attended many such meetings, they gather "to hear each other praise each other for all the innovations they are making." He gives examples of how sharia scholars only care for the money they get from banks, willing to rubberstamp any deal where interest is masked.

No sooner had CMHC announced its plans to study sharia-compliant mortgages, than an imam from Montreal's Noor Al Islam mosque offered his services to Canada's banks, claiming Muslims are averse to conventional mortgages because "it goes against their beliefs," a claim that would not withstand the slightest scrutiny.

Other academics who have studied the phenomenon have reached similar conclusions. Two New Zealand business professors, Beng Soon Chong and Ming-Hua Liu of Auckland University, in an October, 2007, study on the growth of Islamic banking in Malaysia, wrote: "Only a negligible portion of Islamic bank financing is strictly 'profit-and-loss sharing' based. … Our study, however, provides new evidence, which shows that, in practice, Islamic deposits are not interest-free." They concluded that the rapid growth in Islamic banking was "largely driven by the Islamic resurgence worldwide."

In the name of Islam, deception and dishonesty is being practised while ordinary Muslims are being made to feel that their interaction with mainstream banks is un-Islamic and sinful. As Mr. Saleem asks, "If Islamic banks label their hamburger a Mecca Burger, as long as it still has the same ingredients as a McDonald's burger, is it really any different in substance?"
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Tarek Fatah is the author of Chasing a Mirage: The Tragic Illusion of an Islamic State, to be published in March.

Sharia Banking:"There's big business in fooling God"

October 15, 2007

God and financial loopholes -- what of it?
For some religions, there's big business in fooling God

ANDREW POTTER
Macleans Magazine
http://www.macleans.ca/article.jsp?content=20071015_110166_110166&source=srch

Wally: Do you mean you knew what was happening to us all the time?Supreme Being: Well, of course. I am the Supreme Being, I'm not entirely dim ...
-- Terry Gilliam's 1981 film Time Bandits

When I was in graduate school, I spent some time as a teaching assistant for the department's big Introduction to Philosophy course, which served first-year students a tasting menu of questions in logic, metaphysics, and ethics. The most fun to teach were the various proofs for the existence of God. One year, a student submitted a paper where, on the title page, "God" was written as "G-d." When the professor asked for an explanation, the student said he was Jewish, and Jews were not permitted to write out the full name of God. The professor pursed his lips for a moment, looked at the student, and said: "You know, you're not fooling God."

For those of us most familiar with the Christian approach to religion, writing "G-d" to get around a prohibition against writing God's name amounts to little more than impious cheating. Ours is an omniscient God, after all: he knows what is in our hearts and in our minds, and he can't be fooled by legalistic hairsplitting.

Turns out that for some religions, fooling God is not only considered fair play, it is also big business. Consider the controversial bit of religious sea-lawyering known as "Islamic finance" or "Islamic economics": a basket of financial instruments designed to get around the Quranic rule that forbids Muslims from charging or paying interest. Given that interest is the cornerstone of our financial markets, it is pretty much impossible to turn your nose up at interest and participate in the modern economy.

That is why the past few years have seen tremendous growth in sharia-compliant financial instruments, such as interest-free mortgages and savings accounts where the bank rewards the depositor with occasional "gifts of appreciation" for the use of his money.Let's be honest. Islamic finance isn't fooling anyone, least of all God.

Everyone involved understands that the various gifts and deferred payments are just bearded forms of interest, but the proper question is not whether God is fooled, but whether anyone should care.Someone who cares a great deal is the Scourge of Islam, Daniel Pipes, better known as the director of the pro-Israel think tank the Middle East Forum. In a recent article in the National Post about the rise of Islamic finance, Pipes warns that there is nothing "Islamic" about the barely disguised interest payments, and that behind its economic triviality lurks a great political danger.

Drawing on the book Islam and Mammon, by the Muslim scholar Timur Kuran, Pipes argues that Islamic finance was created for political motives, designed to strengthen the Muslim identity by minimizing their interactions with non-Muslims.He concludes that by enabling the economic activities of Muslims and allowing them to "modernize without Westernizing," Islamic economics serves as a source of global instability.

Pipes suggests that it would be much better if Muslims were really forbidden from paying interest or any of its facsimiles, because they would then be relegated "to the fringes of the international economy."This is insane, not to mention a bit obtuse. For starters, not every religion places so much value on correct belief or thought. Observing the faith is in some cases more about following a strict set of rules or codes, cleaving as close as possible to their letter and worrying less about their spirit. Among the big three monotheisms arising from the Mideast, Judaism and Islam are more concerned with rules than Christianity is.

That is why, to Christian eyes, Jews and Muslims seem to expend a great deal of effort trying to fool God.One example is the Orthodox Jewish practice of installing eruvin around neighbourhoods -- symbolic fences made of rope or string slung from lampposts and street signs. It is a way of getting around the rule against carrying things from one domain to another on the Sabbath.

The presence of the eruv around a neighbourhood allows residents to treat the whole area as a single dwelling, which lets them carry stuff outside on the Sabbath without breaking Torah law. Is God fooled? To ask the question is to miss the point.If anything, we should be celebrating the rise of Islamic economics, since if its goal was to keep Muslims isolated from the corrupting influences of the West it has been a huge failure. As a major survey in the Financial Times last spring pointed out, Islamic finance is now a trillion-dollar business, and most large Western banks -- including HSBC, Barclays, and Citibank -- are racing to re-craft all of their products along Islamic lines.

To see this as a source of instability and political danger is sheer paranoia. Far from ghettoizing Muslims, sharia-compliant finance is drawing them deeper into the network of global institutions, helping them to integrate into the modern world without having to assimilate to Western values. Sure, Islamic finance appears to many -- me included -- as little more than an exercise in trying to fool God. But if helping Muslims fool their God is part of the price we have to pay for global economic and political stability, it's the bargain of the century.

Islamic Banking: Posing a substanial poltical danger

September 27, 2007, 6:30

The folly of 'Islamic economics'

The National Post

Though few in the West have noticed the phenomenon, a significant and rapidly growing amount of money is now being managed in accord with Islamic law, the Shariah. According to one study, "by the end of 2005, more than 300 institutions in over 65 jurisdictions were managing assets worth around US$700-billion to US$1-trillion in a Shariah compatible manner."

Islamic economics increasingly has become a force to contend with burgeoning portfolios of oil exporters and multiplying Islamic financial instruments (such as interest-free mortgages and profit-sharing sukuk bonds). But what does it all amount to? Can Shariah-compliant instruments challenge the existing international financial order? Would an Islamic economic regime, as one enthusiast claims, really help end injustice by ensuring "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 held the Saudi-sponsored position of 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 the time of Muhammad, but is in fact an "invented tradition" that emerged in the 1940s in India. The notion of an economics discipline "that is distinctly and selfconsciously 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 a South Asian 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, signed on to the project.
Proponents of Islamic economics assert that the prevailing capitalist order has failed and that Islam offers the remedy. To assess the latter assertion, Kuran scrutinizes 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.

"Nowhere has interest been purged from economic transactions, and nowhere does economic Islamization enjoy mass support," he writes. 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 major Western financial institutions host far larger ostensibly Islam-compliant deposits than do specifically Islamic banks.

"Nowhere," Kuran writes, has the goal of reducing inequality by imposition of the zakat tax (a form of tithing) succeeded. Indeed, the author 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."

In the final analysis, Kuran dismisses the whole concept of Islamic economics. "There 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 anti-modern ? currents of thought all across the Islamic world. It has also fostered an environment conducive to Islamist militancy."

Indeed, the conceit behind 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 political danger.