Posts Tagged ‘Sharia Scholars’

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…..

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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

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.

 

 

 

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

http://islamicdawn.com/wp-content/uploads/2015/01/The-Quranic-System-of-Sustenance-by-G-A-Parwez-Tolue-Islam-Trust.pdf

 

I find it remarkable how many non-familiar observers can quite easily spot the obvious spade in Islamic Finance practices, and call it a spade. However, for them to then completely ignore the issue that the source guidance (the final proclaimation and criterion; The Qur’an) never accepted any favourable position on RIBA (not interest, in any form, simple or compound), and that the deceit or falacy here should be put only at the doorstep of the commercial banking industry and its proponents who invented this fraud.

There seems to be too much of an impression that underlying islamic principles are in someway contradictory; with one hand they oppose ‘interest’ and with the other hand, it is condoned in another form, under another name.

This post will not go into the essential issue of what RIBA is (a more fuller all encompassing term) and not interest, however suffice to say, those who are of the above opinion have only a crass, superficial understanding of what they reject whilst at the same time, plenty of effort is put into unearthing great myths from other elements they wish to debunk – that is what I find odd.

One such guilty party would be the Adam Smith Institute. Their article found here, which references Islamic Finance practices makes this obvious mistake. In a partial response to the issue of time value if money and the innate nature of things, I would also like to refer readers to this piece by Tarek El Diwany

But I want to instead highlight an aspect which once again exposes the current industry for its flaws in constructing alternatives which are not too different from the products they are based upon;

For they all (things like Sukuk bonds and so on) depend upon the absolute rejection of interest, that very thing that we insist is part of the fabric of our reality. The reason we so like Islamic finance is because all of he (sic) successful forms of it are actually constructs that, in the face of the religious insistence that there should be no interest, actually operate in a manner to ensure that there is a time value to money and that there is an interest rate, interest which has to be paid 

Another cat let out of the bag, but wait there is more. The article referenced in the above quoted piece, by Jon Fasman reading a book by Harris Irfan, also provides us with more of the truth;

Yet by the end of the book, Irfan seems genuinely conflicted about his industry. Most of these instruments were reverse-engineered from their secular counterparts, and so devised to comply more with Shariah’s letter than its spirit. His protests against such moves echo those of American politicians who condemn “tax inversions”

….Many of the instruments Irfan discusses were sold by major banks that saw them as just another opportunity. This is not surprising: Governments and wealthy individuals wanted financing that complied with their religious requirements, and banks gave it to them….