Dubai Debts Prompt Review of Shariah Finance
SFW has long maintained–and pointed out–that Shariah-Compliant Finance is in now way immune to market and economic forces and thus cannot provide a safe haven in the event of economic or financial crisis. We point this out because so many financial jihadists routinely commit fraud by claiming that Shariah Finance is protected by the principles of Shariah from fallout from crisis.
The recent Dubai Default Debacle is the latest evidence to indicate that Shariah-compliance is no panacea…as the article below published on an Australian web site points out:
‘The World’, a manmade archipelago off the coast of Dubai, developed by the Nakheel real estate company – which partly relied on the issuance of Islamic bonds, or sukuk, to finance the ambitious project – has come to symbolise for many the vulnerability of the Islamic financial market.
On Nov. 30, Nakheel asked that trading on all its sukuk bonds be suspended until it was in a position to provide further information. This decision included three types of sukuk that amounted to some 3.5 billion US dollars due on Dec.14.
The emirate was luckily bailed out by its richer neighbour, Abu Dhabi, which proffered a 10 billion dollar advance that allowed for the payoff of Dubai’s incumbent debt.
Dubai’s 90 billion dollar debt crisis – both conventional and Islamic – has signalled for many that Islamic finance is no more immune to the global financial crisis than the rest of the world.