Islamic Banking (8 ) Attitude Shifts towards Interest

Post 38--:

Both Christians and Muslims should be aware of the widening horizons of the global ummah. Like today’s Islam, it is widely held that pre-Reformation Western Christianity opposed interest and classified it as usury on basis of economic circumstances of the day. Though its secular Calvin-disdaining offspring have taken Calvin's positive attitude towards interest far beyond his so as to almost render their current buccaneering into something totally different, even contemporary Calvinists, including yours truly, accept the concept and necessity as a given without considering it the end of all things business. It would appear that a similar process is taking place among Muslims.

History of Usury-Interest in Western Christianity

The accuracy of the classical myth re. Pre-Reformational views on usury is doubtful: It is not nearly nuanced enough. In his chapter on “Western Europe before Islam,” Henri Pirenne (1862-1935), a Belgian described by his translator Frank D. Halsey as “one of the greatest authorities in the field of medieval history,” explained that “the Church, it is true, constantly forbade clerics, and even laymen, to charge usurious interest. However, both Christian and Jewish merchants commonly lent at interest. In fact, under some regimes it was considered lawful. “Everybody lent money at interest.” Even bishops paid interest. During the Middle Ages, Venetian merchants borrowed money at interest as high as twenty per cent, even though by this time the Church had adopted an ascetic attitude that made her very suspicious of commerce. It would appear that though the official church, the church institute if you will, had become negative towards interest due to an increasing asceticism, the church as organism, the members, used it rather freely.

It is widely understood that it was the reformer John Calvin who helped dissolve the ecclesiastical cloud over interest by initiating a more positive attitude towards the practice on basis of a more liberal, contextual and historical reading of the Old Testament. Over time, it became commonly accepted by all Christians, including those unhappy with the Reformation!

Developments re Interest-Riba in Islam

There is a move in a similar direction among Muslims today. In 2002, the Islamic Theological Research Committee of Egypt's Al-Azhar Institute, “seen by many as the philosophical centre of the dominant Sunni strand of the faith, has voted 21-1 to approve fixed interest rates.” Sheikh Saber Talaab, head of the research committee secretariat, reportedly explained, "So long as we do not go against what is written (in the Koran) or the Sunna (Islamic tradition)….” Besides, it was argued, “The decision was necessary. Religious jurisprudence means change, and it is illogical to remain frozen while the world changes around us.” “We have a clear conscience.” I have argued several times in the course of my series on Christian-Muslim Relations for a more liberal and historical reading of the Qur'an and other main Islamic sources. Well, this change appears to be the result of this more traditional cum liberal reading.

 Fixed versus Historical Interpretation

So, things are not as frozen and fixed as the literalists would have us believe. Before painting all Islamic banking with one broad brush, we must remember that, far from being a monolithic affair, the picture is one of diverse approaches based on dynamic interpretations of Islam and sharia according to local circumstances, meaning that there is room for innovation and change. The writer of the article from which the material in this paragraph is derived wrote about a report on Islamic banking. It “focuses on the role of Fiqh (Islamic jurisprudence), which is based on interpretation of the Koran, and secondarily, on ijma (consensus).” This approach “offers a lot of room for innovation, particularly with regard to Islamic rules that prohibit elements of financial transactions that are important for the banking industry to grow, prosper and connect to the global economy.” We have again stumbled on the issue of a liberal dynamic interpretation of Islam’s basic documents that is a prerequisite for

viable Islamic banking.

With this I close the discussion on Islamic banking. A lot more can and needs to be said—and most of it has already in books, journals and magazines. For a blog, this is sufficient for now. Perhaps more some other time. Get ready for a change of gears.

Islamic Banking (6) Further Sookhdeo Claims and Assertions

Post 36--:  I   

Wonderful Summer Weather

It’s been and still is a wonderful summer here on Canada’s West Coast, though it was unusually slow in starting.  I have loved it and spent a fair amount of time—weeks in fact—away from my desk and, hence, away from this blog.  Visiting our kids and families in WA and near SF in CA with days of RV-“camping” in between.  Since then, “backyard” RVing in southern BC—with more to come.  If you like a moderate climate without extremes of heat and cold, then BC’s south-west coast and much of Vancouver Island is the place to be. So a bit of a lull, but one you can understand, I believe.  But, while it’s still great summer stuff in the middle of September, here I am, once again slogging/blogging it out.  Welcome to Fall. 

Back to Sookhdeo

Back to Sookhdeo’s claims and assertions re Islamic banking.  They are interesting and challenging.  He worked them out very carefully, which is not saying I support all he writes:

Connection to an Islamist Agenda

§                 Islamic banking is part of the Islamist agenda, to gain support for radical Islam and terrorism and to promote Muslim separatism and even world domination.  Sookhdeo’s list of prominent members of sharia banking boards in the UK are mostly  members of Islamist organizations either with direct terrorist connections or with terrorist offspring. Among the groups he lists is Pakistan’s Jama’at-I-Islami. That should sound familiar to all Nigerians. Would the similarity with their own Jama’atul Nasril Islam (JNI) be purely accidental?  

Moderate Connections?

§                 In the West, these financial institutions “appear outwardly moderate, while secretly pushing for radical goals.” “Although the larger movements [in the UK] claim they are committed to legal methods to attain their goals, their ideology has spawned many radical groups and terrorist organizations” (p. 41).

Inverted Tradition

§                 It is an “invented tradition.”  Such rigid views about interest and profit were not the norm in earlier centuries (pp. 9-10).

Based on Legal Tricks

§                 The system is based on “legal tricks, the interest simply being hidden and relabeled. It has been described as “deception” (pp. 23, 25, 32, 37-38).

Lacking Accountability and Transparency

§                 The system lacks normal and proper accountability and transparency protocols and is not subject to a “robust regulatory framework.”  It can more easily conceal its activities than can Western-type banks. Corruption is a serious problem (pp. 42-47, 51, 63).  

Violates Spirit of Sharia

§                 It “violates the spirit of sharia and may facilitate the activities of criminal financial actors,” including money laundering (pp. 23, 42-43).

Creates Muslim Captive Market

§                 It is a tool to create a “captive market” of Muslims who will deal only with Islamic banks, separates Muslims from the economic main stream and exploits them. Even the British involvement is aimed more at attracting huge amounts of petrodollars than in meeting the demands and needs of the British Muslim community. The latter is “used simply as a pious cover” (pp. 25-27, 79).

Fails to Relief Poverty

§                 Islamic economics, including banking, have “dismally failed in relieving poverty” in Muslim countries (pp. 25, 55).

Not Based on Muslim Concensus

§                 Western bankers and other authorities falsely assume that Islamic banking represents the consensus of the entire Muslim community. In fact, most Arab governments “were at first hostile or ambivalent….” Even today Libya and Morocco refuse them licenses, while some other North African governments “are extremely cautious in their approach….” These negative reactions are due to the perceived links of the system to Islamism.  Oman does not allow Islamic banks “because it believed banks should be universal, not specific.” 75 per cent of British Muslims are said to be “indifferent to sharia finance and that there was no automatic demand for it.” 83 per cent “questioned the necessity” of it.  50 per cent wondered how Islamic these institutions really are (pp. 38-39, 61, 69, 78-79).  

Confusion Caused by Different Traditions and Interpretations

§                 Different sharia traditions and interpretations by various scholars cause confusion (pp. 45, 50-51). 

Shortage of Experts Leads to Extortion

§                 The entire system is dependent on sharia experts in Islamic finance. There is a great shortage of these so that a small body of experts are found on many boards across the world. Some up to 30!  They charge up to $10,000 per hour! (pp. 49-50)

NOTE:  The pagination in the above paragraphs refer to pages in Sookhdeo’s Understanding Sharia Finance.  You can find these summaries in my series Studies in Christian-Muslim Relations, vol. 8, chapter 9).