Complex and sophisticated financial instruments usually signal eventual trouble ahead and the world of Shariah-Compliant Finance is no exception. Derivatives are tough to control, difficult to anticipate and hard to understand. Couple that with sukuk, instruments that are already convoluted to begin with, and you have a recipe for real disaster. Nevertheless, that is what […]
Bank Islam in Malaysia has launched a new Shariah-compliant derivative product called an Islamic Dual Currency Investment-i (DCI-i). This product is wrapped in a murky Shariah cloak, but make no mistake about it: it is a derivative product designed to squeeze additional returns out of fluctuations in foreign currencies. The foreign currency markets are highly […]
Barclays Capital, the investment banking arm of London-based Barclays Plc, is offering Shariah- compliant repurchase agreements to allow Islamic banks and investors manage their funds. Barclays introduced the product worldwide two weeks ago and is focusing on clients in Malaysia and the Middle East. http://www.businessweek.com/news/2010-08-18/barclays-capital-offers-islamic-repos-in-1-trillion-market.html
It seems all is not well in the world of Islamic bonds, known as Sukuk. In addition to declining Sukuk subscriptions, we now have news that Indonesia, the most populous Muslim nation in the world, which has rich oil wealth, held a Sukuk auction which was an utter failure. On June 29th, the government of […]
Derivatives Go Shariah
They said it would never happen. The Shariah scholars said that derivatives were inherently “unislamic” and had no place in Shariah-Compliant Finance. Well, we guess “the truth changed.” Financial Times has an article explaining how derivatives are creeping their way into Shariah Finance. No doubt, greed played a prominent role in this transformation… The release […]
10 Sukuk Defaults at Year-End 2009
While it has received virtually zero coverage in the Western financial media, by researching Islamic blogs, we have come across a very interesting piece of information: there were 10 sukuk (Islamic bond) defaults at the end of 2009. We all know about the Dubai sukuk default, but there were evidently several others, including one involving […]
A Shameless, Shallow Advertorial for Shariah Finance from Oxford Analytica and Forbes.com
Malcom Forbes must be spinning in his grave. His namesake publication’s web site has published an article which basically promotes a financial and economic system which by its very nature seeks to replace capitalism and our free enterprise system: http://www.forbes.com/2009/12/10/islamic-finance-after-dubai-business-oxford-analytica-islamic-finance.html?feed=rss_business In fact, the article reads less like journalism and more like a press release from […]
Warren Buffet once called financial derivatives “financial weapons of mass destruction.” He also said he did not invest in them because he never invested in anything he did not understand and he didn’t think that ANYONE fully understood derivatives. Former Fed Chairman Alan Greenspan also admitted that he did not fully understand the derivatives markets. […]
From time to time we have reported on Islamic bonds, properly known as “sukuk.” These are convoluted instruments created by the Shariah finance community to get around prohibitions against interest. They are controversial even in Islamic circles, especially since major Shariah authority Mufti Taqi Usmani issued a fatwa declaring most of them “unislamic” over a […]
http://www.thejakartapost.com/news/2009/05/26/sharia-trade-swaps-mooted.html The Jakarta Post has an interesting and revealing article this morning. It seems that Syafii Antonio, the CEO of a major Shariah-Compliant institution, is proposing “shariah-compliant currency swaps.” This suggestion is as laughable as it is hypocritical. If a “currency trade swap” looks and sounds like a derivative to you, you’re not alone. It IS a […]
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