Traders at the sharia-compliant Saudi Investment Bank in Riyadh
Islamic banking is becoming increasingly accepted as a viable and fair alternative to the current "Western capitalist" banking system. European governments, including the UK's, are embracing Islamic banking. Gordon Brown recently declared that it was his desire to make Britain the Islamic finance capital of Europe. A number of leading UK banks now offer sharia-compliant financial services and the Treasury is considering the implementation of the sukok, or sharia-compliant, bond. Such moves fail to recognise Islamic banking for what it is — a modern Islamist construct, designed as another wedge between Western Muslims and their societies.
Since the recession, Islamic banking's supporters have been seizing the opportunity to present it as not only a more moral option, but as an economically safer one. But there are three questions that need answering: How is Islamic banking different? Who are its biggest cheerleaders? Why are they pushing for it?
Among the many justifications for his declaration of war against America and its allies, Osama bin Laden cited the un-Islamic and evil nature of the Western financial system. In a November 2002 "Letter to America", he wrote:
"You are a nation that permits usury, which has been forbidden by all the religions. You build your economy and investments on usury. As a result, in all their different forms and guises, the Jews have taken control of your economy..."
Prohibiting the use of interest is the raison d'être of Islamic banking, which claims not to deal in such greed — nor in other haram (forbidden) ventures, such as those involving pork, booze and gambling. There is little doubt that in seventh-century Arabia, the poor were exploited through a pre-Islamic tradition of usury, which would often lead to the doubling and tripling of the original debt. As bin Laden pointed out, usury was banned by all the major religions, and riba, meaning exploitative and excessive interest, was banned by the Koran. However, as with many Islamist ideas, an incorrect interpretation lies at the heart of the attempt to apply archaic principles to modern times.
Riba does not apply to the modern concept of interest, but to excessive and extreme rates of interest that present huge risks to the borrower and a minimal risk to the lender. Islamic banking claims that risk will be shared by both the borrower and lender. But the idea that a modern bank lender shares no risk with the borrower is patently ridiculous. A conventional bank has little incentive in seeing its borrowers fail, the obvious reason being that this increases the chances of them defaulting on loans.
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