Benign Islamic Finance

This article is a response by Lorne Cutler (http://network.nationalpost.com/np/blogs/holy-post/archive/2009/08/28/shariah-finance-a-zero-sum-game.aspx) to Dr. Sebastian Gorka’s assertion on his article in Holy Post entitled Shariah finance: A zero-sum game, in August 28. Click here: http://network.nationalpost.com/np/blogs/holy-post/archive/2009/08/28/shariah-finance-a-zero-sum-game.aspx Dr. Sebastian Gorka is military affairs fellow with the Foundation for Defense of Democracies in Washington, D. C., and associate fellow with the Joint Special Operations University, Florida.

Islamic or shariah-compliant financing is becoming increasing popular, both in Muslim countries and Western countries with large Muslim populations. It was therefore quite a surprise to read Dr. Sebastian Gorka’s assertion (Shariah finance: A zero-sum game, Aug. 28) that the primary reason for Islamic financing is to funnel funds into political and military Jihad to destroy the West. This is based on Dr. Gorka’s view that Islam doesn’t actually prohibit interest, only usury, and as such Islamic banks have really been established to fund jihad with the prohibition of interest really being a ruse.

This is equivalent to saying that the real reason for conventional interest-based banking is to launder money for organized crime. Leading Western banks such Citibank, HSBC, Deutschebank and ABN-Amro have opened up Islamic subsidiaries. It is hard to believe that they would knowingly funnel money to terrorist groups.

At one time, Christianity and Judaism also considered interest as usury and prohibited it. This was at a time when lending was considered taking advantage of the poor. The poor would borrow money to pay off debts of servitude. Any interest added to the burden of the poor was considered usurious. Gradually, however, capital was required in the creation of real wealth. Charging interest was no longer taking advantage of the poor but a critical tool in creating wealth and raising standards of living. While Christianity and Judaism changed their views regarding interest, Muslim scholars did not.

Each Islamic bank has a panel of three Islamic scholars who opine on whether something is shariah-compliant. These panels can only determine what constitutes shariah-compliant financing, not whether the structure complies with the laws of the country, and they have no authority to act against the country’s law.

There are international agreements prohibiting banks from money laundering and funding terrorist groups. If required, existing international agreements can be modified to ensure Islamic banks are governed by these agreements if they aren’t already. If certain banks don’t abide by these rules, Western banks will be prohibited from working with them. Canada’s criminal code also makes it an offense to support terrorist groups. If a religious scholar advising a particular Islamic bank also preaches jihad, regulations could be established to prevent our banks from dealing with that bank. Islamic banks would be subject to the same regulations and supervision as are conventional banks.

Interest is a merely a tool, not a fundamental Canadian or Western value. If certain groups have problems charging interest, there is nothing inherently wrong in setting up financial institutions that can provide funding in a way that does not abrogate religious principles. Our existing and future banking laws and regulations can protect us against the risk of a bank engaging in illegal activities.

Best Regards
ZULKIFLI HASAN
DURHAM UNIVERSITY

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