Thursday, October 9, 2008

Islamic Finance: Part 1

What is Islamic Finance? Or more so what should Islamic finance be? At the moment I think I am ever so slightly disillusioned with the little I know of Islamic Finance. I see it today in its current form as a mere equivalent to mainstream finance. That instead of having the Islamic goals and values, the industry is going down the path of market capitalisation. Creating equivalents of western banking products.

Now I do see the argument for this, that the industry must start somewhere, and establish it's self. Once it is fully established it can create more Islamically sound products, but then the industry isn't as new as people think it is. Its been around in some shape or form for the last 2-3 decades, but only in the west for the last 5-10 years in a growing fashion.

I think most (if not all) of the products are pretty much Halal if done with the right intention, in the way the contracts are structured. however I don't believe that the Islamic spirit is there at all. Instead we now have lots and lots of equivalent products, equivalents to loans, bonds (sukuks), and even appearing in a few places credit cards (that one shocked me).

Allahamdullilah no one has managed to create an equivalent to Derivatives yet, if they did I would be surprised as I see it as glorified gambling, albeit generally very educated gambling, but none the less still gambling.

Its interesting when i think of muslims perceptions esp in the west (time for huge generalisations here), have the perception that Gambling, Alcohol, pre-marital sex are big big no's. Interest does not have that same stigma,I wonder why?

Allah(SWT) has clearly forbidden riba. As shown by the following verses(I never realised how explicitly it was forbidden till recently):

“Those who devour riba will not stand except as he stands who has been driven to
madness by the touch of Satan … Allah has permitted trade and forbidden riba … Allah
will deprive riba of all blessing” (2:275-6)

“O ye who believe! Fear Allah, and give up what remains of your demand for riba, if
you are indeed believers. If you do not, take notice of war from Allah” (2: 278-90)

But yet many muslims see it as a lesser evil. Maybe it's because the loans are used to help further business's or careers, and unfortunatley we(me included) are far too attached to this dunya and thus are willing to sacrifice are scrupels when we shouldn't.

I know if when I actually could afford to get a house (far in the future at this rate, i'm still a student), I would probably get an Islamic Mortgage, as while I don't think it's perfect, I do think it's better then a conventional loan. I dislike how the rent part of most Islamic mortgages are conviently linked to the LIBOR (inter bank interest rate).

Islamicially from my understanding(and I know I am speaking from a postion of little knowledge), money cannot be made from money, but instead value must be added through a service or product.

So I wonder did my random ramblings make any sense? I know I don't even attempt to give a solution nor do I fully get to the bottom of the problem. Further work for another post me thinks.

When I next get around to posting I will continue my musings on Islamic Finance :

Part 2: Islamic Microfinance: reclaiming the islamic spirit?

Ma' Salaama


Sunday, October 5, 2008

the beginning.

Everything starts somewhere, and my blog begins here (stating the obvious aren't I, i overdo the whole sarcasm thing, maybe I will eventually learn). So who am I? Well I'm a 20 something muslim university student (well for another year at any rate). Im born and bred in the UK and like most people my age I think, I am confused. Hence my attmept at an arabic blog name (which knowing me i have got both the arabic and the tranliteration wrong). Ana Mushowish should mean - 'I am confused', so please correct me if i'm wrong.

Whats the point of this blog?

I'm not 100% sure, i think it a way of trying to get some honest feedback on my opinions, while also through the process of jotting down my thoughts seeking clarification for myself.