On November 6, 2008, the U.S. Treasury Department hosted a seminar on Islamic banking to train government employees on Sharia-compliant finance (SCF). According to a press release, it was "designed to help inform the policy community about Islamic financial services, which are an increasingly important part of the global financial industry."
It is interesting to note that while many in the West deride parallel societies, the lack of integration, and overall "foreign-ness" of its Muslim populations, they have no problem embracing Islamic banking. Maybe because this is the one area of religious "encroachment" that allows the West to make money, and lots of it.
Banking oversight in the
One critic, the Coalition to
Stop Sharia, hosted a press conference on the same day to reiterate its concerns, which were previously presented to various
financial heads, but were ignored. The Coalition joins various organizations
that do not want SCF practiced in the
Speakers included: Robert Spencer, author of Stealth Jihad; Frank Gaffney, Center for Security Policy; Dan Pollak for Morton Klein, Zionist Organization of America; Andrea Lafferty, Traditional Values Coalition; among others.
The role of religion in secular and global institutions presents unique concerns that should be scrutinized since true checks and balances are not possible where deference to religious heads is unavoidable. In the case of SCF, only Sharia scholars can decide whether a financial product is permissible (halal) or not. They are thus the only individuals who can theorize as to why or how a product can become "halal." This removes the ability of all practitioners who are not part of the SSB from engaging in product development beyond doing what they are told to find and prevent any illegality. If questions of fraud, breach of duty, negligence, criminal liability, etc. arise over any transactions, these same individuals will nevertheless remain liable.
Consider the current global crisis related to subprime mortgages as a point of comparison. Who did what and how is on everyone's mind. Was the cause naïve consumers or predatory lending? Financial products are complicated as it is without throwing the element of religion into it. Moreover, Secretary of the Treasury Paulson does not have the answers, though he is in charge with no apparent oversight.
In its worst-case scenario,
SSBs act just as unilaterally, can go back on previous decisions, or contradict
the decisions of other SSBs. Who is right and who decides? What administrative
body or court in the
Besides religion, subversive
political goals are another unique element inherent in SCF that subprime
avoided. Renat Bekkin, international law lecturer at the Moscow
State Institute of International Relations (MGIMO-University) and proponent of
For some other Muslims, Bekkin argues, "practicing all principles of Islam, including in the financial sphere, is essential."
This latter group concerns
critics of SCF because they are part and parcel of the global Islamist
movement. Advocates of Islamism define Islam as a complete sociopolitical
system that should govern one's personal and private life. This is a
20th-century phenomenon fueled internationally by oil profit in the
The Coalition to Stop Sharia
believes SCF is one such non-violent strategy since the Islamist movement
advocates replacing capitalism and democracy with Islamic law, or Sharia. While
many progressive Muslims argue and reinterpret Sharia in ways compatible with
universal human rights and democracy, their position remains theoretical. In
practice, Sharia remains an archaic understanding of human relations as
In this context, practitioners
of SCF who are Muslim and non-Muslim and who reside in democratic nations like
the United States put themselves in the position of unintentionally aiding and
abetting seditious activity by promoting particular SCF institutions,
individuals, or transactions that are potentially Islamist. How we are to know
what is and is not is beyond the scope of the
Further, by not alerting consumers and clients of the "dark side" of SCF, these same practitioners are potentially failing a duty of care by not providing material information from which a consumer can make what a court would consider a well-informed decision.
Thus, it is a mistake for the U.S. Treasury to host a seminar to "inform" the public of SCF, without including the criticism. Jumping into a new, little-understood industry like SCF, with the same zeal for profit evident in subprime lending, could lead to new problems in the future. By addressing the Coalition's concerns, the government could create the appropriate regulation, oversight, and transparency mechanisms to counter the possible threat Islamists present to the SCF industry. Or simply realize that the short-term gains are not worth the long-term dangers Islamism's mission against the West presents.
Originally published at: http://pajamasmedia.com/blog/us-government-embraces-islamic-banking/
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