Posts Tagged ‘Islamic Finance’

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.

Please find enclosed a copy of Benedikt Koehler’s text on the application of market based principles extensively throughout out the early and later eras of Islam.

I hope to write more about this enlightening piece in a later post, but meanwhile, please do download a copy and read all about the history you never knew

Early Islam and the Birth of Capitalism – Benedikt Koehler

Also view the following presentation delivered in the City of London at the Legatum Institute, which includes a Q&A

An article from the 2008 economic crises written by the two scholars above makes for worthy reading.

I see it as evidence of calling the bluff of practitioners who dabble in nothing more than conventional finance twisted to fool millions who are easily swayed by superficiality

Boom, Bust, Crunch..

Platforms are rarely provided to scholars who wish to take one step back and question some of the fundamental concepts that are being applied. Few questions are raised regarding the validity of Islamic debt financing, limited liability structures, speculative methods of market trading, or the nature of the monetary system. Such matters are given little attention in the headlong rush to copy interest-based methodologies and this has resulted in a number of embarrassing paradoxes

Abstain

Posted: June 11, 2016 in Consumerism, Poverty
Tags: ,

The Islamic month of abstention (Ramadhan) began on Monday 6th June 2016

A month when we cease to eat and drink; we cease to consume.

We are no longer consumers, we will not buy what is being sold, yet we will give up of our property to those who need it most.

The economic undertones of this period are worth considering

imran-1

 

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.

https://www.shaukatkhanum.org.pk/

 

 

 

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.

https://www.lariba.com/sitephp/index.php

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

 

 

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