Posts Tagged ‘UK Sukuk’

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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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

http://www.islamic-banking.com/NewHorizonDigital/IIBIDec2014/index_Q2_2014.html

In his article written for New Horizon magazine, Mezbah Uddin Ahmad goes through the usual superficial discourse on why Islamic Finance is so unique and innovative (in its deceit), however in his concluding remarks, he lets the camel out of the sandbag and admits;

 The primary concern of the islamic banks is naturally survival, in addition to being Shari’ah-compliant. Customers expectations from banks and their willingness to participate in risk is one of the major challenges in implementing a truly profit-and-loss sharing banking system, as not all customers are willing to take the risk of loss. To ensure the sustainability of the banking model at the initial stage, therefore, Islamic banks came up with Shari-ah compliant financial products that in substance are not significantly different from traditional products. The apparent similarity between the two banking systems allowed the Islamic banking customer, therefore giving it the opportunity to grow.

A regulatory framework that caters primarily for the traditional banking system is another primary factor that forces Islamic banks to structure their financial services in a particular way, often resembling traditional banking services. Even though significant regulatory improvement has already occurred in some countries to accommodate specific needs of Islamic banking, there is a long way to go. 

….you heard it straight from the Camels mouth…

Here is a link to an old article written by Dr. Sahib Mustaqim Bleher, in 2004, however it still stands as a good response to the official arguments put forward commercial banks operating such products.

This is the slippery slope to the destruction of the spirit of Islam, replacing it with a commercialised remnant of ritual practices

I find it useful that the oft abused verse of 2:257 has been countered with the interpretations of 4:46 and 9:37

I feel I should also make a general comment that any argument which relates to the technical workings of the product and its contractual terms should always be put into the wider context of the exact nature of debt and money, which this article rightly does.

A further point is that although the terms have been redefined with these kinds of instrument, there is no argument that a percentage is being applied to a principle sum on a compound basis, doubling and multiplying indefinately (3:130)…..RIBA by any other name

I am in no way supporting the organisation with which the author is involved, named on this website, however another piece which seems to be of some worth is the policy on economics. Of course the most glaring point which I would take issue with, is that nothing can be implemented within the confines of a State structure, itself a post colonial construct which feeds the overriding system, not replaces it;

http://www.mustaqim.co.uk/ipb-archive/policies/economy.htm

 

Please find here and the link below, a fascinating insight to the islamic principles behind Riba/Money and the system that governs these issues.

Umar Vadillo states how the many scholars of today have failed to understand how fiat money is distinctly part of the riba-nomic framework and any solution cannot come from within this all pervasive system.

Of particular note is the following, which details an alternative system using commodity minted money; Dinar’s and Dirhams, which are available to purchase now from the World Islamic Mint

http://umarvadillo.wordpress.com/2013/10/19/muamalaat-the-alternative-to-the-riba-system-exists/ This link gives extensive information of the true nature of Riba from fiqh, and how it manifests itself in the contemporary sphere.

It was announced today that the UK government plans to ask rich Muslims to lend it money

UK issues first Sukuk outside the Muslim world

Reading between the lines; the country is over its head in debt, 900% to GDP by some estimates, and now its time to get Muslims in on the act of bailing the country out – why not exploit as many people as possible, so when interest rates rise, as they inevitably will, and interest (or ‘profit share’ in this case) payments become unbearable, the few within the islamic world that have the funds to buy into this over-rated debt, can loose out, and perhaps go bust, along with the nation and the banks that own its toxic, non-sharia compliant, overpriced, highly risky crap. Why not take out as many players as possible, reset the balance…

Interested in understanding the concept of structuring debt products and the process of securitization? Follow the new LEARN series which will cover some of these matters.