FINALLY…a critical article about Shariah-Compliant Finance…
…actually, it isn’t THAT great, but it’s better than most of the fluff pieces being produced on the subject these days. Foreign Policy has published a piece entitled Faith in the Market. They at least attempt a balanced view of Shariah-Compliant Finance, though they miss the most important points (which we will attempt to clear up here on Shariah Finance Watch). Here is the strongest part of the Foreign Policy piece:
But how truly Islamic is the Islamic finance these men promote? To their critics, many are nothing more than rent-a-sheikhs, willing to give the spiritual nod to just about any financial product for the right price. Within their own ranks, the top sheikhs debate vigorously over which new products and transactions are permissible—and which have been unjustly allowed. One recent study from the AAOIFI concluded that 85 percent of bonds marketed as sharia-compliant were illegitimate. And the fees many of these scholars take in—at times, six figures for a single decision—only add to such critiques.
“There’s a whole industry now—supported by a show of religious authority provided by Islamic scholars—with banks promoting conventional products as Islamic,” says Mahmoud El-Gamal, a professor at Rice University and author of Islamic Finance: Law, Economics, and Practice. “They’re preying on the religiously insecure.” And as the financial crisis continues to unwind, there are a lot of insecure people out there.”
The fact is, the lack of disclosure of so many aspects of Shariah-Compliant Finance does leave open the possibility for fraud and abuse. And that is something that its promoters always brush off too easily. Later on, the article goes on to debunk some of the claims by promoters of Shariah-Compliant Finance that Shariah-Compliance provides immunity against the current financial crisis. It is a good thing that people are starting to push back against such claims.
Still, the article doesn’t go far enough in exploring the disturbing aspects of Shariah-Compliant Finance.
First of all, the article quotes our old friend and terrorist Sheikh Qaradawi as the world’s foremost Islamic scholar, but it makes no mention whatsoever of his well-known and long standing ties to terrorist groups and involvement in terrorist financing through the very Shariah-Compliant Finance he promotes.
Second, the article focuses on an American Shariah authority named DeLorenzo. DeLorenzo makes some pretty revealing statements in the article. Number one, he admits that Shariah-Compliant Finance is in fact a means of spreading Islam. That should be a red flag, especially when one examines DeLorenzo’s educational background. After dropping out of college and leaving America in his late teens, DeLorenzo’s training was entirely in Islam–Deobandi Islam. He studied at a madrassa called Jamia Uloom Islamia in Binori Town, Karachi, Pakistan.
According to a study of Karachi madrassas by the International Crisis Group (ICG), a human rights think tank in Brussels, the Jamia Islamia is the “fountainhead of Deobandi militancy countrywide” and “boasts close ties with the Taliban.”
Later, DeLorenzo served as an advisor on Islamic education in the administration of Pakistani strong man Zia ul-Haq, the man who put together the network of madrassas that eventually produced the Taliban and other militant groups, such as Harkat ul-Mujahideen, Jaish-e Muhammad, and Sipah-e-Sahaba Pakistan.
More recently, here in the United States, DeLorenzo served as the Director of Education of the Islamic Saudi Academy in northern Virginia, a school that issued textbooks promoting the Shariah practices of killing adulterers and Muslim apostates.
The Foreign Policy article portrays him as if he was an economist or financial analyst. He is not and there is nothing in his background that suggests that he has any more education in economic, finance and investment than the guy who hauled off my trash this morning.
That’s what makes his statement in the article that, if only everyone just invested according to Shariah there would be no subprime crisis so laughable. It is unfortunate that the folks at Foreign Policy did not challenge his credentials and look into his background.
Still, Foreign Policy’s critical look at the possibility of fraud in Shariah-Compliant Finance is more helpful than not. At least this wasn’t simply another fluff piece.
In closing, we should point out the most ominous sentence in the article, one which makes a close, critical examination of ALL aspects of Shariah-Compliant Finance so vital:
Saturna Capital, a Washington-based investment firm, estimates that 60 percent of customers for its sharia-compliant mutual funds aren’t Muslim.
To read the entire article click on the link: