Dubai in retrospect: Don’t Blame Shariah!
The Dubai World default on sukuk, also known as “Islamic bonds,” was centered on financial products which were approved by Shariah scholars. Making investments Shariah-Compliant was supposed to protect investors from crisis and calamity. We heard and read such claims from financial jihadists over and over again after the Subprime collapse.
But Shariah-Compliance not only did NOT protect investors, the Dubai sukuk default was just the latest in a disturbing pattern of sukuk defaults. In fact, there is evidence to suggest that the default rate on the Shariah-Compliant sukuk is greater than that on conventional bonds, despite claims from the financial jihadists to the contrary.
Moreover, Shariah-Compliance turned out to be the chief obstacle to settling the crisis after the fact because the arcane rules of Shariah didn’t cover such a scenario (despite the line of sukuk defaults over the past two years).
Nevertheless, the financial jihadists are fast at work to defend Shariah. It was “excess” and “greed” which caused Dubai World to break its promises. Never mind that Shariah-Compliance was supposed to eliminate those factors to begin with…the article linked below should be taken as propaganda and nothing else…