This article must be read, and reread. Try to understand why this author, is concerned about the rise of Islamic banking. His concerns are that the boards who oversee the banking and fast growth do not have the time to examine the institutions to make sure that they are “halal”. The issues of whether the banks are following Shariah law is also of concern. Shariah law itself is something that is a great concern to the west, and the fine tuning of banks to institute this type of commerce is extremely concerning. Fatwas are edicts that call for death in many cases, such as the one that called on Salmon Rushdie when he wrote the book “The Satanic Verses”. This type of banking is not just a way to satisfy Muslims, it is a way to institute the laws of Islam into everyday society, and to make the terms like “fatwa” and “sharia” part of everyday language, and tone it down for the general population. If we allowing the comfort of this type of society to become mainstream, we are doing great harm to democracy. Islam is a law of government and religion, and there is no separation of church and state.
Comments by Allyson Rowen Taylor
The Dispute over Islamic Bonds
Wednesday 09 January 2008
By Lahim al Nasser
Previously, I had discussed the dangers of the jurisprudential dispute
over the spread of Islamic bonds. This dispute came as a result of
Sheikh Abdullah Bin Manei¡¯s statement, which was a response to Dr.
Hussein Hamid¡¯s words. I had hoped that it would not escalate, however
the developments have been unexpected.
Islamic bonds have managed to propel Islamic banking from being a local
industry to becoming a global one in a short period of time þu no
longer than seven years since when Islamic bonds (sukuk) were first issued
in 2000 and were worth no more than US $336 million. In what is
nothing short of an unprecedented leap, these bonds were estimated to be
worth US $30.8 in 2007 according to Bloomberg. However, many clerics have
stated through the media that 85 percent of Islamic bonds do not conform
to Shariah law.
Some have justified the permission of the formulas used to the fact
that they were only temporary and that the fatwa committees had aimed to
bolster the industry. Some have also stated that now was the time to
review these fatwas (religious edicts) after this tool [Islamic bonds] has
proved its worth in domestic and international markets.
In fact; I was surprised by the way in which the issue was first
disseminated through the media before it was debated by the specialist
jurisprudential scholars in order to draw a sound jurisprudential conclusion
with regards to the issue. This method is far removed from the true
scientific method employed to discuss controversial issues.
Moreover, the justification that has been employed to temporarily
permit these bonds is deemed illegitimate in accordance with Shariaa, and
likewise; the approach is unacceptable in the finance industry which
requires stability and standardized tools, especially in the capital market
because of its global nature.
These statements prove that from the point of view of global
institutions that set the standards of the banking industry on an international
scale, such as the Bank for International Settlements (BIS) and its
subcommittees like the Basel Committee and the Basel II Framework do not
take the particularities of Islamic banking into account when formulating
their conventions. The justification for that is that there exists no
criterion that is agreed upon for the Islamic banking industry.
The statements that have been issued with regards to the legitimacy of
the circulating Islamic bonds will undoubtedly reflect negatively on
the Islamic banking industry both locally and internationally. This is
because it will result in weakening the confidence in the fatwa
committees and their resolutions, especially with the knowledge that the bonds
have been stamped with official certified seal by the fatwa committees.
Add to that is the reluctance of many Western financial institutions
and markets to expand in the Islamic banking industry by virtue of the
absence of clear criteria and the fact that it is subject to the
discretion of a group of clerics whose jurisprudential views are not stable.
Perhaps the reason for the present agitation around the fatwas in
Islamic banking is the outcome of mechanisms that have been selected by the
members of fatwa and methodological committees. The member fatwa
committees have come to exercise a monopoly on some of the renowned names in
the industry.
For example, one such member is affiliated to 70 financial institutions
worldwide, which begs the question: When does he have the time to
study and examine the products that are presented to him? Also, the
prevalence of these names [of member fatwa committees] results in a lack of
representation of the jurisprudential schools within these fatwa
committees.
Furthermore, the scientific methodology and process for issuing fatwas
based on studies and research is incomplete in many of the fatwa
committees because of the lack of time available for members of these bodies
to conduct these studies. The outcome is that the decrees issued for
any given institution is not based on the scientific principals for
religious edicts. Additionally, the breach of resolutions issued by the
jurisprudential academies also results in decrees being subjected to
criticism and change.
* Lahim al Nasser is an adviser in Islamic banking
