Must Read this article about Zakat, and Shariah Finance.
Shariah finance: Investors must ask ‘why’
The Islamic finance sector is in a funk because both banks and Shariah scholars are not providing solutions which are Shariah-based. Shariah-compliant finance is flourishing and expanding amongst the banks due to the large amount of petrodollars that are coming into the Middle East, thanks to oil now at US$120 per barrel.
To entice this cash, blind exuberance is driving banks and financial institutions to offer vehicles that prohibit usury and sin industries. This willful blindness and the lack of both transparency and due diligence may cause the Shariah-compliant finance to be the next sub-prime fiasco, only this time with pernicious aftermaths.
Shariah law authorities, some of whom are now being well-paid by Barclays, Dow Jones, Standard & Poors, HSBC, Citibank, Merrill Lynch, Deutschebank, Goldman Sachs, Morgan Stanley, UBS, Credit Suisse and others have the power to dictate Shariah compliance as deemed by ‘scholarly consensus’ on matters of finance, family, penal law, apostasy and war.
But Shariah scholars are being sidelined as the ones the banks want and look for are those who will be ‘conciliatory’ with their judgment and assessment. In short those who are willing to conform rather than those who are rigid and strict.
Sharia-compliant funds usually donate 2.5 percent of profits as zakat. Certain returns on investment that do not meet Shariah law standards must also be purified. This money must be donated to Islamic charities While such money assists peaceful Muslim causes, some of it has gone ‘ka-boom’.
The Holy Land Foundation, Benevolence International Foundation, and Global Relief Foundation, all major Muslim charities, were shuttered in December 2001 for allegedly supporting terrorism.
Investment disclosures state that this percentage can be as high as 6% of the profits of investments. With US$900 billion already in Shariah-compliant finance assets, the potential for billons of dollars to be misused is genuine.
There are still a lot of unresolved questions in Islamic finance and Islamic economics had made very slow progress since 1940. And yet, by reading the literature, one is given the impression or comes across the claim that Islamic finance will solve the entire world’s woes, will somehow provide for ‘social justice’ in a way that standard Western economics cannot but only it could be immediately and fully implemented.
The incoming onslaught of Islamic finance is real and it is now spreading into every capital market promoted heavily by Wall Street masters, the very same people who gave us sub prime mortgage securitisation.
Investors have the right to question the validity of these Shariah-compliant finance funds/ vehicles. Given the possible fraudulent misrepresentation of the potential liabilities of Shariah finance funds under present regulations, investors must learn to ask why.
Malaysiakini’s Letter for commenting purpose by WH
http://thexstories.blogspot.com/2008/07/shariah-finance-investors-must-ask-why.html
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