Muslim finance is the application of 7th century camel caravan trade to the 21st century of global commerce.
MUSLIM FINANCE
Banking On Allah
Devout Muslims don't pay or receive interest. So how can their financial system
work?
By Jerry Useem
There's nothing in Osman Abdullah's bearing
to suggest an Islamic fundamentalist. He's a businessman, sober in dress and
political outlook. Ask him about America, and he'll talk fondly of his time at
the University of Wisconsin, where he earned his MBA. But when it comes to his
banking habits--and the Koran's ban on giving or receiving interest--Abdullah
turns deadly serious. "Allah gave us very clear instructions: Don't make money
on money," he says. The words from Chapter 2, Verse 278 of the Koran are, in
fact, quite specific: "O you who believe! Have fear of Allah and give up what
remains of what is due to you of usury.... If you do not, then take notice of
war from Allah and His Messenger." "If I break that," says Abdullah, "I'm dead
sure that I'm going to get very bad results in the hereafter. I believe it as I
believe in talking to you now."
We are talking, just now, outside Shamil Bank in the tiny Persian Gulf state of
Bahrain. It's the bank where Abdullah keeps his money, and, except for the
tellers' untrimmed beards and the section for ladies' banking, it looks much
like any other: customers standing in line, an ATM machine, a hum of efficiency.
But Shamil is not like any other bank. For starters, Abdullah's savings account
isn't really a savings account at all, but something called a mudarabah account:
Instead of earning fixed interest, his savings are invested directly in a range
of ventures, such as construction projects and real estate. "In Islam, money has
to work," Abdullah explains. "If it works, we have to share the profits. If it
doesn't, you don't owe me anything else." That means his nest egg could shrink
if enough of those ventures fail. But, he says, "I'm willing to take the risks."
So, it turns out, are an increasing number of Muslims. At a time when the words
"Islam" and "finance" are more likely to conjure the association "terrorist
money laundering," the Muslim world has quietly embarked on a very different
sort of jihad: building a financial system where interest--a phenomenon as old
as money itself--does not exist.
Spread across the Middle East and beyond are more than 200 Islamic financial
institutions: banks, mutual funds, mortgage companies, insurance companies--in
short, an entire parallel economy in which Allah, not Alan Greenspan, has the
final say. Industry growth has averaged 10% to 15% a year. Sniffing opportunity,
conventional banks like Citibank and HSBC have opened Islamic "windows" in the
Gulf. And while the industry's market share is still modest--about 10% in
Bahrain--its very existence challenges the modern assumption that global
capitalism flattens all before it.
Which leaves just one question: How on earth can it work?
This spring, Shamil Bank helped Abdullah buy a car through a transaction known
as murabaha, which is more distinct from mudarabah in function than in spelling.
In a deal you'll never see from GMAC, Abdullah identified the Toyota Corolla he
wanted, then asked the bank to buy it from the dealer for roughly 3,600 dinar
(about $9,500). At the same time he agreed to buy the car from Shamil for 4,000
dinar, to be paid in monthly installments over three years. The two sales were
executed almost simultaneously, but because Shamil Bank took possession of the
car for a brief period of time, everything was kosher. Or rather, hilal.
The result looked a lot like interest, and some argue that murabaha is simply a
thinly veiled version of it; the markup Shamil charges is very close to the
prevailing interest rate. But bank officials argue that God is in the details.
For example, any late fees Shamil collects must be donated to charity, and the
bank cannot penalize a borrower who is genuinely broke.
Mortgages, meanwhile, are out of the question for Abdullah. That's why a house
he's building in his native Sudan sits unfinished near the Nile River. "I
started it four years ago," he says. "Sometimes I stop the construction until I
collect enough money."
Given the inconveniences, you might ask: What's the point? Can earning a little
interest really be such a big deal? Bahrain's most eminent Islamic scholar
provided some answers.
I found Shaykh Nizam Yaquby at the back of his family's store in Bahrain's
humming market--a diminutive, robed figure partly obscured by the piles of
papers and books on his desk. They include both the hadiths, or sayings of the
Prophet, and Inside Secrets to Venture Capital, which more or less capture
Yaquby's eclectic background. He is trained in both economics (at McGill
University in Canada) and in Islamic sharia law (in Saudi Arabia, India, and
Morocco). During its heyday many centuries ago, sharia was the world's most
vibrant body of commercial law, its contracts recognized from the Arabian
peninsula to the Iberian peninsula. Then it fell into a long decline, which
Yaquby and other Islamic scholars are doing their best to reverse.
As a member of Shamil Bank's five-member sharia board, Yaquby issues fatwas, or
opinions, on which transactions are Islamically acceptable and which are
forbidden. On the day of my visit he was dispensing advice to a steady stream of
callers. Was it sinful, a 15-year-old boy wanted to know, to continue living in
his father's house while his father was receiving interest?
"There is a hadith: 'The body that is nourished from nonpure sources is bound to
go to hellfire,' " Yaquby declared with a somewhat incongruous grin. But his
advice to the boy was milder. "My answer to him was that he should advise his
father politely and gently. However, the boy was not committing any sin, because
his father is responsible in the sight of Allah."
Just how serious a sin is paying or receiving interest? Yaquby noted that
Christianity and Judaism got over their hangups about it sometime during the
Middle Ages. (The Old Testament offers several stern warnings about interest.)
But Islam never really budged. Back in the days of Mohammed, the reasons for
deploring interest were pretty self-evident. Loan-sharking was rampant, and
failure to repay a loan could mean slavery. By outlawing interest, Islam
advocated an economy based on risk-sharing, fair dealing, and equity--in both
the financial and social-justice senses of the word.
Islamic scholars believe this system is superior on several counts. It leads to
more prudent lending, they say, by encouraging financiers to invest directly in
an entrepreneur's ventures. ("A financial system without interest is more
interested," says Shaykh Yusuf DeLorenzo, a Virginia-based Islamic scholar.) If
adopted fully, say the scholars, interest-free finance would also prevent future
Enrons and Argentinas. "One reason for prohibiting interest is to keep everybody
spending according to his limit," says Yaquby. "This consumerism society was
only created because of the banking system, because it encourages 'buy today,
pay tomorrow.' You also have poor economies in debt to rich ones. This is
because of borrowing and lending with interest. So this is creating big economic
chaos in the world."
Fourteen centuries after these principles were laid down, their application can
be a tricky matter. Needless to say, ancient texts are mute on such matters as
derivatives and stock options, meaning scholars like Yaquby must extrapolate.
Currency hedging, for instance, is prohibited on the basis of gharar, a
principle that says you shouldn't profit from another's uncertainty. Futures
contracts? Not allowed, since Mohammed said not to buy "fish in the sea" or
dates that are still on the tree. Day trading? Too much like gambling. Credit
cards? Not cool, though debit cards are.
Bonds? Well, that's where the disagreements start. Malaysian scholars have
approved the issuance of specially designed "Islamic bonds." But Middle Eastern
scholars, who take a harder line than their Far Eastern counterparts, have
roundly criticized them. "Playing semantics with God is very dangerous," warns
Yaquby. "Calling fornication 'making love' doesn't make it any different."
Everybody can agree on one matter, though: It's okay to buy and sell stocks,
since stocks represent real assets. And now they can be traded safely using the
Dow Jones Islamic index.
Launched in 1999 with the help of Yaquby, the index offers a prescreened
universe of stocks for the devout stock picker. One screen removes companies
that make more than 5% of their revenues from sinful businesses. That expels
such notables as Vivendi (alcohol), Citigroup (interest), Marriott (pork served
in hotel restaurants), and FORTUNE's parent company, AOL Time Warner
(unwholesome music and entertainment). A second screen eliminates companies with
too much debt, the cutoff being a debt-to-market-capitalization ratio of 33%. A
third screen applies the same standard to a company's cash and interest-bearing
securities, while a fourth makes sure that accounts receivable don't exceed 45%
of assets. "Islamic investing is low-debt, nonfinancial, social-ethical
investing," explains Rushdi Siddiqui, who manages the index at Dow Jones.
Of the 5,200 stocks in the Dow Jones global index, 1,400 make the cut--yet even
those may not be entirely pure. If a company makes, say, 2% of its money from
selling pork rinds, an investor must give away 2% of his dividends to charity, a
process known as "portfolio purification." Then, too, he should urge management
to exit the pork-rind business.
So what does a typical Islamic portfolio look like? Actually, a lot like the
Nasdaq 100, since technology companies tend to carry acceptable levels of debt.
That made for a rough 2001, as favorites like Microsoft and Intel sputtered. But
demand for Islamic mutual funds is booming. There are now more than 100 funds
worldwide, including three based in the U.S., while a clutch of Internet
companies position themselves as the Muslim E*Trade (iHilal.com), the Muslim
Morningstar (Failaka.com), and the Muslim Yahoo Finance (IslamiQ ). The latter
offers members a feature called "Ask the Scholars."
All of which raises another question: How high a price must investors pay for
following the rules? "Some people say you have to apply the COBM--the Cost of
Being Muslim," says Yaquby. But he and others insist that no such tradeoff
exists. Obey God's rules, in other words, and your portfolio will prosper.
It is an argument that holds great appeal in the Arab world, where moral decay
is frequently blamed for the region's millennium-long material decline.
Nostalgia for the lost golden era of Muslim power has been a strong impetus for
Islamic banking. "The Islamic economy covered half the world," says Jamil
Jaroudi, Shamil Bank's head of investment banking. "How do you think Islam
reached Indonesia and Malaysia? It was through traders, not jihad." Indeed,
Mohammed himself was a trader who early in his life led a caravan from Mecca to
Syria.
The golden era gave way to a period of colonial domination in which
Western-style banking was imposed on much of the Islamic world--a source of
resentment to this day. (Individual Muslims handled this dilemma differently.
Some opened interest-bearing accounts under the principle of darura, or
overriding necessity. Others opened accounts but refused the interest. Still
others opted for their mattresses.) It was mostly that resentment that gave
rise, in the 1940s, to the quasi-academic field known as Islamic economics.
As an attempt to build a "third way" independent of capitalism and communism,
Islamic economics was never long on scientific rigor; one contemporary academic
calls it "bad moral philosophy with a little Keynes thrown in." But it produced
a voluminous critique of Western capitalism and its attendant evils, notably
speculation, consumerism, volatility, inequality, "unnecessary" products, large
corporations, and of course usury. Whereas conventional economics was built on
Adam Smith's notion of harnessing human nature ("Every man working for his own
selfish interest will be led by an invisible hand to promote the public good"),
Islamic economics proposed to reform human nature. "The intended effect," the
University of Southern California economist Timur Kuran has written, "is to
transform selfish and acquisitive Homo economicus into a paragon of virtue, Homo
Islamicus."
For decades this vision remained just that--a vision. It was the oil boom of the
1970s that turned it into a movement. In 1973, flush with petrodollars and keen
to reassert their Islamic identity, Muslim nations formed the Islamic
Development Bank, a sort of interest-free version of the World Bank. Two years
later the first Islamic retail bank began accepting deposits in Dubai.
Not everyone welcomed the phenomenon. While Malaysia promoted Islamic banks as a
constructive outlet for religious fervor, Saudi Arabia would not allow them,
lest they imply that the kingdom's existing banks were un-Islamic. (The Saudi
royal family, not incidentally, subsists largely on income from conventional
investments.) The government finally allowed one to open in 1987, though the
word "Islam" was nowhere in its name. At the radical end of the spectrum, Iran,
Pakistan, and Sudan officially Islamicized their entire banking systems--in
theory anyway. In practice, their fundamentalist clerics had little interest in
economics--the Ayatollah Khomeini famously scoffed that the Islamic revolution
was not about "the price of watermelons"--and settled for changes that were
mostly cosmetic.
Elsewhere, scandal threatened to capsize the whole enterprise. The 1989 collapse
of several nominally Islamic investment houses in Egypt led to disclosures about
some very un-Islamic practices, such as fraud. And last year's failure of a
Turkish Islamic bank, Ihlas Finans, panicked depositors at Turkey's other Muslim
banks.
But in banking centers like Kuwait, Dubai, and especially Bahrain, which is
known for its strict regulatory oversight, Islamic banking is serious business.
A respected group known by the acronym AAOIFI (Accounting and Auditing
Organization for Islamic Financial Institutions) has codified sharia rulings
into a set of industry standards. The early zealots have given way to more
pragmatic professionals. Even the sharia scholars--once recruited from the local
mosque and barely fluent in English, much less financial statements--now come
toting advanced degrees in economics. "In the last five years," says Shamil
Bank's Jaroudi, "the industry has accomplished more than it did in its first
20."
Now it is making inroads in the U.S., home to seven million Muslim-Americans.
Here the most pressing issue is home ownership. Since buying a house usually
requires a mortgage, many Muslims end up renting their whole lives, thus missing
out on a crucial component of the American dream. Azmat Siddiqi was one of them.
A manager at Applied Materials who immigrated from Pakistan 22 years ago, he
hoped to circumvent the problem by making an all-cash purchase. After years of
saving, he, his wife, and their two daughters finally had enough for their dream
property: a $1.3 million plot of land facing the mountains in Saratoga, Calif.
But then Siddiqi's stock holdings plummeted, leaving him $275,000 short. "I
thought, 'By golly, should we let go of it?' " he says. "I looked at the Koran
for guidance."
He also looked on the Web, where he discovered a Pasadena-based company called
Lariba, which offers a lease-to-own arrangement for Muslim homebuyers. Lariba
bought the property in partnership with Siddiqi, who agreed to pay rent to
Lariba while buying out its $275,000 ownership share over ten years. Unlike
interest, the rental price could fluctuate as market conditions changed. "There
was a very high premium," says Siddiqi, 45. "But to me this was like a godsend
opportunity to achieve my real estate objective and not incur the negatives of
interest."
Lariba is still tiny in relative terms; it closes 15 to 30 mortgages a month.
But it recently struck a deal with Freddie Mac that could vastly increase its
volume. "We are like ants among the giants," says Lariba's founder, Dr. Yahia
Abdul-Rahman. "Insha'allah, we will catch up." Meanwhile, HSBC has begun
offering Islamic mortgages in the New York City area.
Despite growing acceptance of Islamic banking, supporters concede that it has a
long way to go. The basic problem, they say, is that Homo Islamicus keeps acting
a lot like Homo economicus. Take the idea of profit-and-loss sharing. For the
concept to work, a bank must know how much profit, or loss, there is to share.
Yet in countries with widespread use of double bookkeeping--one for the tax
collector, one for the safe--business owners can easily understate profits or
overstate losses. "If someone is using [an Islamic bank], it doesn't mean that
he is guaranteed to be moral," says Saiful Azhar Rosly, an economics professor
at the International Islamic University in Malaysia. "Good Muslims are still
tempted by the devil."
Another problem is that profit-and-loss sharing tends to attract entrepreneurs
with dimmer prospects, who are looking to share losses in the event of failure.
Entrepreneurs with the best prospects are more likely to seek out fixed-interest
financing to maximize the returns on their presumed success. The "adverse
selection" problem saddles Islamic banks with bad risks.
Perhaps not surprisingly, then, profit-and-loss sharing deals constitute only
15% of Shamil Bank's transactions, while the murabaha double-sale, considered
the most gimmicky of techniques, accounts for more than 30%. "We are very
careful because [profit-and-loss sharing deals] are very risky," acknowledges
Shamil's CEO, Dr. Said Al-Martan. "You have to be involved in the company, which
is not easy in this part of the world. It's much easier to do leasing or
murabaha."
Such admissions have left the industry open to charges that it has opted for
pragmatism over purity--something Islamic hard-liners have pounced on. "And so
the core Islamic concepts sit neutered, no longer a different paradigm but
instead just another member of the product range," writes one firebrand on the
Website islamic-finance.com. "What a humiliation this is for a great body of
law." Another writer is even more strident: "The 'Islamic Bank' is a Trojan
horse which has been infiltrated into Dar al-Islam.... [It] is a totally
crypto-usurious institution and like all other usurious institutions must be
rejected and fought."
When I read some of these passages to Yaquby, he smiled patiently. "These are
very sincere people, but they are not realistic people," he said. "Of course we
would like Islamic banking to have more activities with benefit to society, and
also to have more courage in sharing risk. But if you're saying that until we
reach this ideal state, we should do nothing, this is where we object. Because
until then, me and you have to do banking. We have to purchase our homes. We
have to invest our wealth."
These days, Islamic banking faces another challenge: the lingering suspicion
that it is connected to terrorism. So far, there is little evidence that its
activities are any more suspect than those of conventional Arab banks. (The U.S.
government's list of terrorist organizations includes one small Islamic bank,
Al-Aqsa Al-Islami in the West Bank.) Islamic finance has always had more to do
with conservative, devout Islam than radical, political Islam. Nonetheless,
Sept. 11 has put the industry on the defensive, with some depositors withdrawing
money for fear it would get caught in an anti-terrorism dragnet. "A lot of
investors were frightened, to be honest," says Atif Abdulmalik, CEO of First
Islamic Investment Bank in Bahrain." 'Collateral damage,' I call it."
Even if those fears prove unfounded, there's the question of how Islamic finance
fits into the broader issues raised by Sept. 11. Could it reduce the Muslim
world's isolation by serving as an intermediary between pure belief and pure
capitalism? Or will its litany of rules merely build the walls higher? Should it
be seen as an innovative force? Or a reactionary one?
Among the optimists is Frank Vogel, a Harvard Law School professor who helps
organize the university's annual conference on Islamic finance and has
co-written a book on the topic. "It's very much in our interest that it
succeed," he told me, "yet I'm afraid that we're going to be against it, that
we're going to make all these snotty remarks. Time is running out for healthy,
happy experiments like this. The radicalization, the desire to make yourself as
ugly to the West as you can--that rage isn't only at us, it's at the secular
forces in their own societies. We need Islamicization, because they're not going
to stop being Muslims overnight."
Oddly, Vogel's co-author, Harvard Business School finance professor Samuel Hayes
III, gave me a different slant. In his view, literalist interpretations of the
Koran threaten to choke off Muslim participation in the global economy. "Prophet
Mohammed's teachings take very practical account of commerce in the seventh
century," says Hayes. "It's not up to me to say, but if he were living today, I
think he would find some accommodation. [Otherwise], there's no way a business
can operate competitively."
In the end, even Islamic scholars concede that Hayes might have a point. "Once
you face reality," Yaquby said shortly before I left his store, "it's not
possible to isolate yourself from the whole economic system of the world."
Malaysia's Bank Islam vows
probe as financial scandal looms
October 28, 2005
KUALA LUMPUR --
Malaysia's first-ever Islamic bank vowed on Friday to search out and prosecute
those responsible for $127 million in losses as the issue threatened to turn
into a major financial scandal.
Bank Islam's managing director Noorazman Aziz said that it was working with the
police, central bank and anti-corruption authorities to get to the truth behind
the massive net losses for the financial year to June.
"Once investigations are completed, we will push for prosecution," he said in a
statement.
The bank, which was established in 1983, posted net profits of 85.74 million
ringgit ($22.7 million) last year but dived into the red in the latest balance
sheet that showed a 480.0 million ringgit net loss.
BIMB Holdings, which controls Bank Islam Malaysia, said that the loss was mainly
due to a provision of 774 million ringgit, mostly to cover non-performing loans
from its branch in Labuan, Malaysia's offshore financial hub.
"Closer supervision and stricter accounting treatments revealed that losses were
much larger than what the head office in Kuala Lumpur had expected," the bank
said.
"Loans were given out generously without sufficient understanding of the risks
involved, including country and project risks," it said.
Growing outrage over the losses led lawmakers this week to call for heads to
roll at Bank Islam, while Prime Minister Abdullah Ahmad Badawi said that the
bank had to find the culprits immediately.
"Bank Islam must act fast. If the negligence has elements of crime, appropriate
action must be taken without delay. We cannot forgive this negligence," Abdullah
was quoted saying in the New Straits Times Friday.
Malaysia's second finance minister, Nor Mohamad Yakcop, has reportedly said that
the loans were given to "non-relevant parties" and that action would be taken
against those responsible.
Noorazman declined to reveal details of the investigation and said that poor
administration was hampering the process.
"It is proving to be an arduous task for us because of poor bookkeeping
practices, which require us to actually painstakingly reconstruct the credit
files," he said.
"We also understand that some of the companies that took these loans are no
longer in existence," he added.
Malaysia, largely Muslim but with sizable Chinese and Indian minorities, is a
leader in Islamic banking after introducing the service in 1983 that provides
products and services that comply with Sharia or Muslim religious laws banning
the earning of interest.
How the West Came To Run
Islamic Banks (Muslim banks are owned by the west)
Giants like Citigroup dominate the sector, through Islamic
subsidiaries and hired Sharia scholars.
By Owen Matthews
Newsweek
Oct. 31, 2005 issue - You're a pious Muslim with a few million in oil dollars to invest. So would the perfect Islamic bank for you be Citigroup, perhaps? HSBC?
Actually, yes. Giant Western banks—or, rather, their Islamic subsidiaries—are leading the market for financing that complies with Qur'anic laws forbidding lending money for profit, or sponsoring un-Islamic activities such as gambling or smoking. Citigroup's Bahrain-based Citi Islamic subsidiary was first into the market in 1996, and now leads the pack with deposits of more than $6 billion. Citi and at least 10 other Western majors dwarf the biggest locally owned rival, Al Baraka of Bahrain, worth a little more than half a billion.
Westerners are drawn in by oil money. The Middle East is enjoying its fastest growth in a generation. According to Islamic Banking and Finance magazine, there are $265 billion in deposits that comply with Sharia, the law that governs the behavior of Muslims, finances included. That's up 17 percent in the past year, and by almost 10 times in the past decade, according to the U.A.E.'s Sharjah Islamic Bank. Since 1996 Dow Jones has offered indexes of stocks vetted by Sharia scholars. Now there are more than 40 Islamic indexes, and last year Islamic stocks on average outperformed the market by 5 percent.
How did Western banks come to dominate a market predicated on Islamic purity? A generation ago, an Islamic bank was just a simple investment house that, instead of paying interest on deposits, created dividends by buying and renting out property. "Islam forbids making money on money," says Alun Williams, marketing director of the new Islamic Bank of Britain. "But it does allow you to rent, and to trade." Now Western banks are using that template to pioneer Islamic credit cards, Islamic mortgages and Islamic bonds (known as sukuks) that during the past year have financed everything from a $1 billion upgrade of Dubai airport to Pakistani government debt. As growth picks up in the Middle East, more and more Muslim-run corporations find they need sophisticated services, from bond issues to derivatives, that so far only Western banks provide.
The Western banks gain Islamic credibility by hiring top-drawer Sharia scholars to sit on their boards. "The caliber of your scholars is the basis on which these [financial products] are marketed," says Majid Dawood, a London-based consultant on Sharia compliance. Because there are just a handful of financially literate Islamic scholars in the market, most sit on the boards of many institutions and can, says Dawood, command salaries of as much as $88,500 per year per bank. Sheik Mohammed Taqi Usmani, a former Sharia judge on the Supreme Court of Pakistan, sits on the board of Citi Islamic, HSBC, Al Baraka and eight others, and is chairman of the Dow Jones Islamic indexes' Sharia panel.
But the trend toward investing in Islamic funds really took off after 9/11, when many Muslims began bringing their money home from America. Since then, international banks like Societe Generale, BNP Paribas, Deutsche Bank and Standard Chartered have all entered the Islamic banking business. Accounting and consulting firms like Ernst Young are now offering Islamic financial services. The recently opened Islamic Bank of Britain, owned by leading Islamic banks and other institutions from the Middle East, plans to create a retail-banking chain for "average income" Muslim Britons, says Williams.
Customers in Muslim nations are driven to Western banks in part by distrust of their own banks. Prominent failures, such as the 2001 collapse of Turkey's Ilhas Finance dented depositors' faith. In Turkey, the Islamic world's largest economy, the fledgling Islamic-banking sector is lobbying the state to guarantee deposits of up to $36,000, which could in time make Turkey a major player. In Malaysia, where more than 11 percent of deposits are now Sharia-compliant, local houses like Bank Muamalat are working to gain on the multinationals. "Local Islamic banks lack sophistication," says Humayun Dar, an Islamic economist. "Customers are still more comfortable with an international name." Even if the rules are strictly local.
Islamic banks lack regulatory norms: Expert
6/3/2006
The Peninsula
DOHA • A number of key issues related to Islamic banking were discussed at a seminar here recently. Lack of adequate regulatory norms for Islamic banks in Qatar and a near absence of facilities to train personnel to man Shariah-compliant banks were some of the main topics discussed in some detail.
One of the speakers, Dr Ali Al Saloos, who is a prominent Doha-based Muslim cleric known for his deep understanding of Islamic economics, banking and finance, stunned the audience by saying that some Islamic banks claim to be Shariah-compliant while in practice they are not.
"They are cheating Allah and the people," he said of such banks. According to Al Saloos, most directors of Islamic banks do not know what Shariah-compliant banking is, yet they remain on their boards. "Many of them have no idea about Islamic banking," he said.
"I am afraid some of these Islamic banks may start doing things that are actually forbidden by Shariah," said the scholar. He, however, cautioned people not to generalise based on what he said.
"I wish to clarify that my intention here is not to create suspicion in the minds of people."
Al Saloos said that despite the fact that Qatar has a vibrant Islamic banking industry, there is hardly any focus on creating cadres who are qualified and trained to man Islamic banks.
What is needed is a department where Shariah and economics are taught together and this kind of inter-disciplinary teaching facility can be set up at Qatar University itself, said the cleric.
Muajeb Turki Al Turki, from the Qatar Central Bank (QCB), also addressed the symposium. He talked of the advent and growth of the industry in the country since 1982 when the first Islamic bank was established.
Al Turki said that the QCB had recently come out with fresh directives that permit conventional banks to set up Islamic banking windows as well as exclusive branches.
A speaker from the Qatar Islamic Bank (QIB), Abdullah Mustafa Kamil, however, pointed out that regulations governing the Islamic banks in Qatar were not adequate.
He lauded the role of Islamic banks in the country in controlling inflation. According to Kamil, the Islamic banks needed to put more effort in creating public awareness about the industry and the services and products they offer.
Conclusion: Muslims must pay cash or use lease buy-back schemes to conduct major purchases of goods and services. Thus the standard of living of most Muslims is low unless you are a oil barren sheik who can purchase a German car made out of fine silver.