Archive for the ‘Islamic Finance’ Category

The findings imply that Islamic banks are not different from conventional banks, except for different branding to cater for a different category of clients

(INCEIF 2016)

A 2016 study in Malaysia, one of the most prominent centres for Islamic Finance, compared the two kinds of institution in order to ascertain if the difference between the two are genuine or merely superficial. It lends weight to the latter judgement.

What does this say about the industry from a body set up to proliferate the understanding of it? Learn more about the ICEIF here


Assuming one can get around the root of the matter (which you can’t since these are facts which have not been questioned, rather they have been accepted by the practitioners themselves throughout history), which is; Money is fictitious, no intrinsic value, it is fiat, it is always loaned into existence – all money is interest bearing, furthermore, money is of (created from) interest itself, consider the following points which I would like to highlight in order to put the concept of these debt products into perspective;

  • These creations are based/modelled on debt products. The conventional guise of this instrument is an interest bearing debt, the sharia equivalent must mimic all of these qualities, and perform for the same uses ie. it is the same product by a different name (= DECEIT)
  • All cash flows, or rather ‘Rent’/’Profit Share’ must be benchmarked against the prevailing risk free rate, or the yield must meet a company’s cost of capital requirements and therefore all cash flows, whatever their innocent sounding names, are embedded with interest. Remember, an interest rate is itself is comprised of the risk free rate, a risk premium and a profit margin. Without this, the whole reason behind ‘Islamic Finance’ goes out the window – it must meet a clients required return in comparison to other assets/products that can match yield available
  • These are still IOUs, adding to the proliferation of debt based financing  – in a system/world which is created of and from Debt. Again, remember that one of the needs which spurred creation of this product was the need to raise/take advantage of, surplus capital in a particular demographic/region considering that which was already available elsewhere, or not easily available rather. The status quo of building ever higher mountains of obligations still stands true.

I hope to be able to build upon this argument in future posts…..



I remember some years ago, a British commentator remarked in an off the cuff, ignorant manner, that Islam (and therefore Muslims in general) had not contributed any thing of substance in the last 100 years or so.

Which Islam or Muslims was he referring to? A number of respected intellectuals have made valid contributions to the most profound topics of discourse in contemporary matters, be they governance, enterprise or spirituality. Perhaps this person never made an effort to look beyond his own sphere of understanding in order to identify these contributions

One such example of what the Muslim world has delivered for contemplation of all nations states, is the funding model based on Zakat – financial or non-financial investment for the sake of others, not to gain personally, but to establish a method to fulfill a need which private profiteering cannot.

In the UK, we struggle to foot the cost of basic welfare through taxation. The number of taxes in existence are far too much to understand how far the web stretches and how much they impact our everyday lives, destroying incentives to save or to give.

In a part of the world riddled with abject poverty, injustice and failing state apparatus, a beacon of light is being provided by world class medical institutions such as the Shaukat Khanum Memorial Hospital (SKMH), entirely funded by donations and providing free cancer treatment to the most disadvantaged patients. Across the third world, similar initiatives  do exist, whether they are based on Zakat or not, I highlight this project due to it being based on principles found at the core of the Islamic faith; giving up of ones own property to provide for others, in a way which establishes justice.

At the end of 2015, SKMH opened its second site in Peshawar. The factors which make this institution thrive, are not confined to Islam, however it certainly demonstrates the way in which incentives, resources and an interest to gain from intangible, distant means, not necessarily financial in nature (based on a belief in a power other than that of Man), can be made to work perfectly well for a wider section of the population, independent of state disintegration.




A few of my previous posts have covered attempts by various parties to introduce their own versions of a financing method closer to what is perceived as genuinely riba-free.

To name a couple, Ansar Finance in the UK, Grameen Bank from Mohammed Younus have made an effort to shed light on alternative models which are closer to interest-free financing, in that an interest derived rate is not charged to the customer.

Ofcourse, the wider context of this should not be forgotten – the money itself, the paper (or digits) we use as a means of transaction – is of interest and IS interest itself. Given this fundamental fact, one cannot escape true defined RIBA in any such method outlined in these endeavors.

However, designing alternative models can expose the wider audience to the weaknesses of the mainstream Islamic Banking practices, which are all in name not in spirit, and I find it refreshing and worthwhile to introduce different forms which may be used as a stepping stone to something widely accessible and equitable in future, Insha Allah.

Contributing to this intiative, are LARIBA, a US based institution who have introduced their own version of what they feel is a RIBA-free mechanism. Judge for yourselves weather you feel their method is actually viable, however this company has been established since the late 1980’s and I favour their understanding of the monetary system, even though they still resolve to make use of it. They too understand and are upfront with their clients about the debt enslavement aspects of interest based loans, and also draw attention to the wider Islamic Banking industry which still uses interest rates in their products.

Their website has a number of worthy materials on related topics which I would also like to recommend.

Allah (SWT) knows best about their intentions and actions.




Adding this Imam to the prominent few scholars that truly understand money and the nature of Riba, this lecture demonstrates the misunderstandings of other Muslim commentators when faced with this holistic issue.

The content is not new, much of it has been covered extensively in other posts.

More toxic offerings in the guise of islamically compatible products. I always like to draw readers attention to the reasons given for such launches – read between the lines, not so much to do with trying to offer people something which will meet their needs, but more a case of chasing the petro dollars, while they last that is.

With all the QE money being funneled into global asset prices, can Muslim investors not appreciate the superficial nature of these funds – they are destined to end in tears

Another text exploring how an alternative system could, in theory function, although this is simply one interpretation. By G.A.Parvez