{"id":60,"date":"2007-07-24T17:06:40","date_gmt":"2007-07-24T17:06:40","guid":{"rendered":"http:\/\/blog.beliefnet.com\/news\/2007\/07\/islamic-banking-bilks-the-piou.php"},"modified":"2007-07-24T17:06:40","modified_gmt":"2007-07-24T17:06:40","slug":"islamic-banking-bilks-the-piou","status":"publish","type":"post","link":"https:\/\/www.beliefnet.com\/columnists\/news\/2007\/07\/islamic-banking-bilks-the-piou","title":{"rendered":"Islamic Banking Bilks the Pious, Critics Say"},"content":{"rendered":"

RNS
\nby Omar Sacribey
\nRizwan Kadir liked working in finance, but when he read a
\nverse in the Quran that said engaging in usury was the same as “waging
\nwar” against God and Islam’s prophet Muhammad, fear struck him.
\n“When you come across an aya (verse) like this, it makes you start
\nwondering what you’re doing with your life,” said Kadir, an investment
\nbanker in Chicago.
\nHe started reading about Islamic views on interest and talking to
\nworkers at Islamic banks that offered interest-free finance as a
\nfoundation of their business.
\nKadir eventually concluded that the prohibition on interest didn’t
\njibe with Islamic logic and that the “interest free” arrangements touted
\nby Islamic banks were just usury under another name.
\n“What they’re doing is calling the same thing with a bunch of
\ndifferent names,” said Kadir, who has a mortgage, auto and student loan
\npayments.
\nThe prohibition on charging and paying interest is a cornerstone —
\nalong with withholding investments from trades like alcohol and
\npornography — of the rapidly emerging industry known as “Islamic
\nfinance.”
\nThere are some 270 Islamic banks with more than $265 billion in
\nassets, according to sponsors of the International Islamic Finance
\nForum, a semi-annual industry conference that meets in Switzerland this
\nfall. Most of the banks are found in wealthy Muslim nations like Saudi
\nArabia, Bahrain, Dubai and Malaysia. In addition, many Western banks,
\nsuch as industry giants Citibank and HSBC, have established Islamic
\nfinance departments.
\nBut a growing chorus of critics say the idea that Islamic law
\nforbids all forms of interest is incorrect. Moreover, they argue, some
\nof the bankers, lawyers and clerics who draw up and bless “interest
\nfree” transactions are profiting off the pious with arrangements that
\nlook a whole lot like usury.
\nIslamic scripture condemns riba, an Arabic word meaning “excess,”
\nwhich is commonly interpreted as usury. Some Islamic law scholars assert
\nthat all interest is prohibited. Others say only excessive interest is
\nprohibited, and that interest is an indispensable part of society that a
\nlogical God wouldn’t condemn.
\n“The notion that the spirit of the Quran is against modern forms of
\ninterest, like on a mortgage or a consumer loan, this to me makes no
\nsense,” said Timur Kuran, chairman of Islamic studies at Duke
\nUniversity.
\nThroughout history, interest was common in the Islamic world, in
\nplaces such as the Ottoman Empire, Kuran said. Controversy over the
\npractice only emerged during the 1940s when Indian Muslims cited the
\nneed for an interest-free banking system as one reason they needed a
\nhomeland separate from Indian Hindus, the scholar said.
\nSince then, the Islamic finance sector slowly developed, before
\ntaking off in the last 20 years, with Islamic financial institutions
\noffering a growing number of transaction models, such as profit sharing,
\nthat avoid interest.
\nOne example is a “murabaha” mortgage. Say a Muslim family wants to
\nbuy a home for $100,000. It might go to an Islamic bank, which would buy
\nthe house and sell it to the family for $120,000. The family would then
\nhave a certain amount of time to repay the bank. A similar practice was
\ncommon in medieval Europe when interest was prohibited by the Roman
\nCatholic Church.
\nMahmoud El-Gamal, chair of the Islamic economics department at Rice
\nUniversity, argues that such transactions amount to a “bait and switch.”
\n“The whole is, I want to lend but I don’t want to call interest,
\n`interest,”‘ said El-Gamal. Such transactions cost more than other
\nfinancial arrangements and hurt Muslim consumers, according to El-Gamal.
\n“They’re trapped because they’re told they’ll fry in hell if they go
\nto regular banks,” he said.
\nEl-Gamal said obedience to the form of the contract often supersedes
\nthe spirit of Islamic economic values, such as serving the poor.
\nIndustry advocates counter that even if some financial transactions
\nserve the same purpose as interest that doesn’t mean they are forbidden
\nby Islam.
\n“It’s possible, as it is in many ethical and legal systems, for two
\ndifferent actions to have the same outcome but because of the way
\nthey’re done — for one to be wrong or illegal in that ethical or legal
\nsystem, and for the other to be permissible or lawful,” said Taha
\nAbdulbasser, an Islamic law scholar with the Islamic Finance Project at
\nHarvard Law School.
\nHussan Qutub, a spokesman for Guidance Financial Group, an Islamic
\nbank based in Reston, Va., that offers interest-free mortgages, said
\nIslam draws a difference between monetary lending agreements and
\nagreements based on commodities.
\n“We’re trying to reach the same end result that other financial
\norganizations are trying to reach, which is putting people in homes,”
\nQutub said. “But how are you going to get me there, that’s where we
\ndiffer.”
\nSkeptics like Kadir remain unconvinced. “For me, Islamic finance is
\nnothing more than affinity marketing, you market your services to
\nsomeone who you have an affinity with,” he said.
\n
\nCopyright 2007 Religion News Service. All rights reserved. No part of
\nthis transmission may be distributed or reproduced without written
\npermission.
\n<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

RNS by Omar Sacribey Rizwan Kadir liked working in finance, but when he read a verse in the Quran that said engaging in usury was the same as “waging war” against God and Islam’s prophet Muhammad, fear struck him. “When you come across an aya (verse) like this, it makes you start wondering what you’re…<\/p>\n","protected":false},"author":22,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"fbia_status":"","footnotes":""},"categories":[1],"tags":[],"class_list":["post-60","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"yoast_head":"\nIslamic Banking Bilks the Pious, Critics Say<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.beliefnet.com\/columnists\/news\/2007\/07\/islamic-banking-bilks-the-piou\" \/>\n<meta property=\"og:locale\" content=\"en_US\" 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