TRT World Roundtable: How Islamic is Islamic Finance?

Posted: November 15, 2019 in Islamic Finance
Tags: , ,

The host asks all the right questions….and there are some very telling answers in my opinion….Mehmet Asutay provides some incisive contributions which I always have time for

My initial response to some of the defence given for the industry is as follows;

• In terms of risk sharing, this is an oft cited defence but can easily be broken down further, these transactions are not between equal sized parties with relatively similar assets at risk; the ownership of one house being the largest asset an individual owns compared to a bank which has a significant balance sheet (even the smaller ones) and can absorb the loss of one property is not exactly the type of risk sharing which it is always prompted as

• Regarding the investments in halal products, there is talk of how resilient these have been during the financial crises, however this doesn’t cover some important facts which should be stated. If an investment is low risk, it will typically make less of a loss in times of downturn and correspondingly make less of a return during an upturn too – this is a basic understanding of risk and return, but is not mentioned when talking about the performance over the last deep recession.

Another important point with halal investment assets which should be considered is the ethical dimension and how any definition of what is considered halal and ethical will differ based on preference. Although there are ways to standardise these when it comes to retail offerings, there will always be valid opinions which depart from this standard practitioner view. To add to that, how can something not be compromised in some way? Everything within this monetary system must be contaminated in some way, and this cannot be ignored – there is no parallel financing system in place.

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