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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Hong Kong and Islamic Finance

I was delighted to learn recently that Hong Kong authorities have provided for the exercise of Islamic finance in the territory last week. On my first trip into Red China in 1977 I was surprised to see the level of solicitousness the communists offered Moslems.  Halal meals, prayer opportunities, etc.  And the new grand exhibition centers have mini-mosques and separate halal eateries.  I avail myself of these since they are little patronized, and offer plenty of room for a diner where everywhere else seats are unlikely. The staff wonders at my pedigree.

Enough travelogue!  The challenge of Islamic finance is it is trending toward the accommodations that appear to have infected Christian polity.  As one Moslem told me, modern Islamic Finance is "pork labelled beef on the package."

What is delightful with this news is Hong Kong is an excellent place to test out Islamic Finance in practice.  Hong Kong is transparent and fair, so the operation and effect of any innovations in Islamic Finance will be clear and present.  Hong Kong is literally agnostic on the faith claims of Islam, so there will be no arguing to distract the effort. There will be no subsidies or favoritism to cloud the outcomes.  

At the same time, Hong Kong also includes free market activity, practices totally in line with the Biblical foundations esteemed by the "people of the book."  A most excellent laboratory to test and observe finance in practice.

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UAE to Become Center of Islamic Finance?

For the UAE to become the center of Islamic finance, it will have to overtake Bahrain.

The UAE has what it takes to become a hub for Islamic finance, according to Sheikh Mohammed bin Rashid Al Maktoum, the country's vice president and prime minister.

Sheikh Mohammed, also ruler of Dubai, made his comments at a workshop organised by the higher committee for development of Islamic economy sector to follow up progress on action plans and proposed initiatives.

The comments section make some good points,  and I will add I think it will be a challenge to stay orthodox in practice, something that does not seem in place in modern Shariah finance.  I am still studying the "geography of Islamic Finance" so I look forward to finding such examples.  I am convinced that where orthodox, we'll find more peace, justice and prosperity.

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Saudi Arabia and Loan Facilities

Reuters is reporting that Prince Alwaleed is refinancing his operations which looks like rather conventional capitalist loans.  An interesting term was used by observers, see if you note it:

In June, sources told Reuters the investment firm had hired Deutsche Bank and Banque Saudi Fransi for its maiden debt issue in the local bond market.

"Maiden?" This usually means first time, as in the first time for a usury-based loan, and of course the allusion is sexual.

Being taking advantage of is often alluded to in sexual terms, for example "getting screwed."  Coarse people, these financial writers.

The question for a student of Islamic Finance is how a Moslem can get around the usury prohibition with such deals.  There is a geography is Islamic finance in which various countries more or less comply with the rules.

Ibrahim Warde (NB: This is an entire book .pdf download) notes:

Islamic finance is a complex and paradoxical phenomenon. A brief

overview of a leading Islamic banking group suggests the limits of facile

and sweeping generalizations: Dar Al-Maal Al-Islami (DMI), the largest

transnational Islamic group, is headquartered in the Bahamas and

operates primarily out of Geneva yet uses the language of the Islamic

umma; although controlled by Prince Mohammed al-Faisal al-Saud (the

second son of the late King Faisal, after whom the principal subsidiaries of

the group are named), the group does not operate a commercial bank in

Saudi Arabia, a ‘fundamentalist’ country that has been instrumental in

bringing about modern Islamic banking yet is one of the least hospitable

countries to Islamic banks; to complicate things further, the DMI group

has nonetheless been a significant conduit of Saudi money and influence

throughout the Islamic world. In sum, the story of Islamic finance is a vastly

complicated one, and cannot be captured without a full understanding of

religion and finance, and also of history, politics, economics, business and

culture.

Now the Bible makes a controversial exception to the usury ban -

 "To a foreigner you may charge interest, but to your brother you shall not charge interest, that the LORD your God may bless you in all to which you set your hand in the land which you are entering to possess. (Deuteronomy 23:19,20)

Controversial because it is often seen as the source of mischief.  But perhaps the explanation is somewhere in there, this is making money on money outside of Islam, and therefore permissible, a point that is I imagine debatable.

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Islamic Institutes in China

it is a contrast to see Chinese authorities favoring Moslems as the USA tends to denigrate Moslems, indeed, invading their lands which is the worst kind of denigration, as if people cannot look after their own affairs.

I am not naive about anything state-sponsored, but it is remarkable how the Communist Party has created a network of schools for Moslems in China.

Moslem Unity

Moslem unity is about as chimerical as Christian unity.  Here is an interesting ten minute history lesson.

On Melons and Revolution

As the Ayatollah Khomeini reportedly said, ‘The revolution is about Islam, not about the price of melons’.  (From Warde, Ibrahim, Islamic Finance, see below.)

Yes, but, the price of melons and economic freedom certainly sends people to their religions for a solution to their problems.  It was a fruit seller in Tunisia whose terrible frustration with the economic regulations in Tunisia that set off the Arab Spring with his self- immolation.

And this in a country that was actively investigating becoming the "Hong Kong of the Mediterranean."

 We value Hong Kong’s experience in international trade. We’re not benchmarking ourselves with Hong Kong, but we are trying to follow the successful steps done by Hong Kong over the last 30 years in developing trade with other countries.

And that means freedom.  I wonder where that initiative stands?  This is one reason we can never resort to violence.  Would things have changed in Tunisia to the point fruit sellers need no licenses, and from there they would move up the chain to ever more value-added goods?

I am reading a very good book on islamic Finance.  I recommend it.

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The Stability of Islamic Finance

In the 1997 financial crisis, one of the worst hit countries was Malaysia.    At the time the Prime Minister Muhamad Mahathir.

1. Earlier Mahathir said: "Nowadays, in the so-called open economy, the rich countries have found a way of subverting the poor countries. Everything is in their favor. They have money, they can subvert us. We can work for 40 years to build up our economy, these people just come and rob us." Quoted in "Speculators 'Free to Hammer Ringgit,'" The Sunday Straits Times (Singapore), Aug. 17, 1997 page 21. His second in command, Deputy Prime Minister Anwar Ibrahim also saw dark forces at work: "It is clear that what we are experiencing now is a form of economic war being launched by a Western syndicate in the stock and money markets." Quoted in "Malaysians Told to Rally to Help Ringgit Rebound," The Straits Times, Sept. 5, 1997.

There were other countries that were devasted as well, such as Thailand. Malaysia is a Moslem country, with Islamic finance.  Why was it not spared the economic crisis?

Not all Islamic nations maintain the same set of rules.  some may be considered more liberal than the others.  One may speak of a "geography of Islamic finance."  Malaysia is considered the most liberal of the countries.  It would be interesting to see a list of financial instruments permitted by country and the relative stability of that country's finances.  One would expect the more conservative the Islamic finance, the more stable the economy.

China Opening a New Hong Kong?

Journey to the West is a classic Chinese tale, and it appears and economic version is occurring now.

moviecritic.com.au

Trade between China and Arab states reached $200 billion in 2011, up 35 percent from a year earlier. Two-way investment grew eightfold during the last decade.

In pursuit of more business, the Communist Government will cut taxes.

China has approved the establishment of "an inland opening-up trial zone" in Ningxia and "a comprehensive tax-free zone" in Yinchuan as part of a major effort to promote economic opening-up of the region, home to more than 2.2 million Muslims of the Hui ethnic group.

http://english.cri.cn/6909/2012/09/13/2561s722113.htm

Too bad capitalism does not permit freedom like communism does.