October 15, 2008

Exclusive: Sharia-Compliant Finance: How Not to Solve the Financial Crisis


Over the past several weeks, political and financial analysts alike have offered many ideas on how to deal with the effects of the subprime mortgage debacle and the ongoing global financial crisis.
One of the most recent suggestions came from the Jihadist community. Actually, it was not as much a “suggestion” as it was a threat. As reported on the Family Security Matters blog on Sunday, October 12th, a leading Jihadist suggested that capitalism be replaced by an “Islamic economic system.”
The threat came from Sheikh Yusuf al-Qaradawi, one of the world’s most prominent scholars in the Jihadists’ threat doctrine: sharia.
Often referred to in the West as “Islamic Law,” sharia goes way beyond any other legal system. Sharia applies to every aspect of every Muslim’s life, from what a Muslim is allowed to wear to economics. In fact, “Islamic economics” and “Islamic finance” are actually just euphemisms for sharia-compliant finance, since financial transactions referred to under such names are distinguishable only in that they must be in line with sharia principles and practices.
One of the principles and practices of sharia-compliant finance that everyone in the West should be very wary of is something called zakat, which refers to the charitable contributions that must be made to approved charities in the name of fulfilling the obligatory tithing of faithful Muslims. In fact, under sharia-compliant finance 1/40, or 2.5%, of assets must be diverted to charities selected by sharia scholars, like Sheikh Qaradawi.
Sheikh Qaradawi is widely regarded as one of the premier sharia authorities in the field of economics. When Qaradawi called for replacing capitalism with an Islamic economic system, it was not a crackpot sermon in some remote mosque in the desert. An analysis of Qaradawi’s curriculum vitae reveals that he is very influential indeed (here is a partial listing of Sheikh Qaradawi’s credentials):
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