Studying Islamic Finance

السلام والازدهار العدالة المجتمعي
You are visiting a blog associated with an online noncredit course studying the topic of Islamic Finance, moderated by John Wiley Spiers. Feel free to participate in our discussion, and if you are interested in taking the course visit

Saturday, March 1, 2014

Islam the Religion of Peace: Jews of Rhodes

Jews thrived on the Island of Rhodes from about 200BC, including 400 years under Islamic rule.  That Islamic rule ended in 1912 when the Italians conquered Rhodes.  Within some 30 years, there was not a single Jew on Rhodes, most having been killed.

Moslems tried to save the Jews from the Nazis.    We never hear about Jews thriving under Islam.

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Saturday, February 8, 2014

Islam and Forgiveness

The last two days I attended a conference on Forgiveness in Islam at the University of Washington.  Prof. Arzoo Osanloo brought tremendous resources together and better yet introduced scholars who will esteem each others work for the coming decades, each improving the other.

For my part I got a brief chance to discuss my particular interest with Prof. Moumtaz, and that is loans, debt forgiveness and usury in Islam.  I had some general discussions with Profs Turner and Barfield that were enlightening.  The fireworks were saved for last with Profs. Lemons, et al and Nakissa going at it over "conceptualizing the habitus".  Frankly, I am used to professors who get into it like that, and I welcome it.

I did form a question somewhat outside of my amateur study, and it relates to Prof. Osanloo's studies of the Iran experience.  Prof Osanloo related a story of lad to be hanged under a regime more "radical (in the positive sense of "at the roots") in which the family offended decides whether the murderer is to be executed.  Given what I heard from the other professors, let's have a case that is the Shariah version of "open and shut."  Two adults playing chess (nothing disreputable as Prof. Barfield noted) in a cafe, lots of witnesses, Farhad beats Ehsan five games in a row, Ehsan is angry and begins to denigrate Farhad, Farhad is not having that and suggests Ehsan should learn to play chess if he wants to win, it becomes a shoving match, Ehsan loses the shoving match and screams "I'll kill you.." Screams it again on the way to the kitchen, screams it again coming out of the kitchen with the knife (three times) and then Ehsan kills Farhad.  Mid-sized city, relations not too close and not too far, (as prof. Ben Hounet noted), a clear straight murder case.

Judge rules, clear case, Ehsan's life is forfeit.  Ehsan makes an abject apology, blames himself for having pride in his chess-playing, when his skill was a gift from God and so not only did he murder Farhad, he is guilty of blasphemy and deserves to die, etc.

The family is sad at the murder of Farhad, sad at the whole case, moved by Ehsan's repentance, and decides to forgive for the love of God (let's ignore the problem of blood money for the sake of argument).  And under the radical Shariah, Ehsan walks free.  (And following Prof. El Fadl, this forgiveness is sad and beautiful.)

My observation: given all of the talk in the conference to the status of the forgiven in a regime of forgiveness, surely one can appreciate that even a forgiven Ehsan, free to walk, has had a profound sentence imposed upon him: he is a murderer.  The Ehsan before the murder and the Ehsan after the murder are two different people.  From inability to find a chess partner to compromised marriage prospects, a murder conviction is no small thing.

In the recent, western experiment someone who has "served his time" has been rehabilitated and the legal fiction is "justice served."  It seems to me, in our system, this is an extremely expensive process that guarantees we arrive at nonsense.

Now, take the Ehsan case today, as I understood the new laws in Iran in the same case today Ehsan walks free out of the Shariah court, and into the state court where he faces an "Article 12" prison term of 3 to 10 years, under the recent, western european innovation that a murderer has offended the legal fiction of the state (my editorializing).

So my question is, in the "article 12" regime example today, just what does the state bring to the polity by imposing a jail sentence?

My thesis:  mixing polities only makes things worse, but rent-seeking is an eternal human endeavor.  The experience of Ehsan the forgiven ought to carry weight in the considerations of polity change.  Prof. Kanafani-Zahar highlighted stability problems with these hybrid approaches.

Radical systems are proven by the test of time, but are subject to prejudice or woefully misunderstood.  Under the Timurids Afghanistan was the world's California and Herat its San Francisco (my biases, but you take my point).  It seems to me the problem is not a lack of innovation in mix-and-match NGO recommended systems, but a lack of restoring what works.  

Now I am not proposing the world go Timurid, but in a place like Hong Kong where the state is near non-existent, Moslems practice Shariah, the Chinese see the deal broker, the Christians use mediating institutions, the Hindus have their system, and the Jews theirs.  In spite of a reputation for probity, fairness, independence and accessibility, the courts are rather unattended.  At the same time Hong Kong is a beacon of peace and prosperity. 

What little reading I've done on the Prophet I recognize as a merchant his esteem of freedom.  Instead of Weber's 1919 definition of the state as a monopoly on violence, settled in the West, perhaps Islam can organize states as "protectors of freedom", evident in the rationale of the prohibition on usury, a process which enslaves people.  I am sure there are other examples of freedom esteemed.

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Monday, January 20, 2014

Plain Dealing

One aspect of Islamic finance is its emphasis on clarity and plain dealing.  On the other hand, let's look at a rule from a capitalist book:
This Statement provides accounting and reporting standards for transfers and servicing of financial assets and extinguishments of liabilities. Those standards are based on consistent application of afinancial-components approach that focuses on control. Under that approach, after a transfer of financial assets, an entity recognizes the financial and servicing assets it controls and the liabilities it has incurred, derecognizes financial assets when control has been surrendered, and derecognizes liabilities when extinguished. This Statement provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings.
Definitions are so convoluted that books have to be written to explicate a "true sale" from one that is not true.  This makes it unlikely that partners to a deal can really appreciate their risk.

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Friday, January 17, 2014

Housing Bust in Canada

Mish Shedlock is notable for getting credit as a component of a lack of hyperinflation in that great debate.  He is mystified as to how his predictions of a real estate bust in Canada have not yet occurred.
No one knows for sure precisely when any bubble will burst. I got the US housing bubble correct but missed Canada by a mile.Read more at
This is easy: Canada requires a 20% down payment and there is no mortgage deduction on Canadian taxes.  So those seemingly insignificant points actual have profound effects.

For a decade most homes in USA were bought with nothing down, sometimes even negative LTV, but in Canada someone actually had to demonstrate enough discipline to save a down.  A much more responsible customer base.

Next, with mortgage interest deduction on taxes in USA, buying a house is a tax dodge, making the reason for having a house to that extent abstruse.

When it comes to usury (interest) even slight rules can have large effects.

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Thursday, January 16, 2014

Libyan Banks and Shariah

Comes 2012 news of protests in Libya:

A number of employees at a branch of Sahara Bank in Benghazi have held a demonstration outside the bank to protest against its use of interest. They demanded that the bank start using Sharia-compliant banking methods.
According to the Libya Herald, none of Libya’s major banks are Sharia-compliant, but the Governor of the Central Bank, Saddek Elkaber, has said that he believesdemand for Sharia-compliant banking is so high that it may become an important part of Libyan banking.

I wonder if the banks were Shariah-compliant under the late leader Muammar Khaddafi, who died in Oct 2011.  And now...
Preparations are underway for an international conference organized by the Central Bank of Libya in collaboration with the World Bank and the Islamic Development Bank on Islamic banking in Libya.
So the geography of islamic finance continues to evolve.

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Monday, December 30, 2013


From the New Testament, James 4, 13-17:

13 Go to now, ye that say, To day or to morrow we will go into such a city, and continue there a year, and buy and sell, and get gain:
14 Whereas ye know not what shall be on the morrow. For what is your life? It is even a vapour, that appeareth for a little time, and then vanisheth away.
15 For that ye ought to say, If the Lord will, we shall live, and do this, or that.
16 But now ye rejoice in your boastings: all such rejoicing is evil.
17 Therefore to him that knoweth to do good, and doeth it not, to him it is sin.

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Saturday, December 28, 2013

Halal Duck

One of USA's largest duck producers has a Halal offering in its line:

Halal Whole Duck (5-5.5 lbs) 

I mentioned earlier Costco was carrying whole Halal lamb.  With 1/4 of mankind to serve, this should be good business.

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