By Christopher W. Holton
Periodically we see articles and marketing pieces come out promoting Shariah-compliant finance as somehow more “ethical” than conventional finance. In fact, Shariah finance is often promoted as the ethical substitute to conventional finance and promoters of Shariah finance, notably Sheikh Youssef De Lorenzo, who has written that Shariah finance should be referred to only as “ethical investing.”
There are real problems with this fraudulent messaging.
The latest example comes, curiously enough, from Malaysia.
We say “curiously enough” because Malaysia, which has been viewed as the leader in Shariah finance in Asia, has been in the news lately because their Prime Minister is embroiled in a scandal involving a huge state investment fund, which we reported on back on 28 August:
This is hardly the end of ethical problems involving Shariah-compliant finance. As we have reported repeatedly here on SFW, the largest Shariah-compliant financial institutions in the world are Iranian state-controlled banks, such as Bank Melli, Bank Saderat and Bank Sepah. For years, these banks have been under US and EU sanctions for their activities involving Iran’s state sponsorship of terrorism as well as proliferation of nuclear weapons and ballistic missiles. These can hardly be viewed as “ethical.”
In addition, who can forget the huge default by Dubai real estate company Nakheel back in 2010 which flooded the Shariah bond market with red ink? How “ethical” was that?
Nor are the problems involving ethics and Shariah finance limited to institutions and transactions. They extend to the individuals who are heavily involved in Shariah finance.
Take Sheikh Yusuf al-Qaradawi for instance. This is a man who sits as chair of the Shariah Advisory Boards for some of the largest state-owned banks in the Persian Gulf region, such as the central bank of Qatar. He is banned from traveling to the US, Great Britain and France due to his ties to “extremists.” He also has endorsed female genital mutilation and called for attacks on civilians in Israel.
Then there is Mufti Taqi Usmani, a prominent member of the self-regulatory body AAOIFI, who has long-standing ties to the Taliban and has written hate-filled screeds directed at Christianity.
The fact is, there is no evidence that Shariah financial institutions or transactions are any more ethical than conventional institutions or transactions and to say otherwise constitutes fraud.