posted by Christopher W. Holton
We recently warned readers that the shariah finance industry would likely tout shariah compliant finance as a shelter from the economic fallout from the Wuhan virus pandemic.
That hasn’t started yet, but we are seeing the shariah finance industry referencing the pandemic to spread propaganda about shariah compliant finance in an article in a publication called International Policy Digest.
The claims made in the article linked below are the standard fare from the industry; they haven’t yet taken to promoting shariah compliant finance as an antidote for the virus. Nevertheless, this article provides us with a good opportunity to review some of the holes in the industry’s claims…
“Islamic banking follows the principle of non-interest banking. Sharia Law justifies and propagates this non-interest banking on the basis that the collection of interest (riba) breaks the natural bonds between individuals, reinforces immoral behavior, and leads to social unrest.“
Here we have a claim that infers that borrowers under shariah are able to borrow money for free. That just isn’t true at all. In fact, there have been indications in the past that borrowing under shariah can actually be more expensive than conventional borrowing.
Note also the reference to immoral behavior. One supposes that violent jihad could be considered immoral behavior, but certainly the shariah finance industry might not see it that way, since jihad is a fundamental tenet of shariah.
The passage above refers to “social unrest,” indicating that it can be caused by borrowing under the collection of interest. Given the social conditions in much of the Islamic world, it’s safe to say that the collection of interest is not the only source of unrest.
“Islamic banking is a culturally distinct form of the ethical investing concept — the practice of using one’s ethical principles as guidance in investment selections — found in the commercial banking system. Investments involving alcohol, gambling, and other forbidden industries are prohibited under the framework of Islamic banking.“
This passage above is a topic that we have written about in the past. The shariah finance industry is fond of referring to itself as “ethical.” Money managers under shariah finance are tasked with avoiding alcohol and gambling as examples. What they leave out is that they also avoid any industry that may be involved in pork products and any industry or firm with ties to the state of Israel. The barbaric and medieval practices of shariah are A-ok though.
Then there is the whole matter of zakat and what we call material support of terrorism in America. Under shariah, Muslims are supposed to devote 2.5% of their wealth every year to zakat, a religious tax under shariah. As we’ve detailed time and time again, one of the eight destinations of zakat is to “those fighting in the way of Allah, including those involved in Islamic military operations for which there is no allotment on the army roster.” If this sounds a lot like funding terrorists, that’s because that’s exactly what it is. Not exactly ethical is it?
I will give this article credit for using a prominent example from Iran, the world’s most active terrorist-sponsoring nation, to explain some of the issues involved with shariah banking. The fact is, Iran has by far the most shariah compliant financial assets of any nation in the world.