Sharia Banking Conquers Europe

All over Europe Islamic banks are establishing branches, Western banks are offering Sharia-compliant financial services, and European governments are trying to outcompete each other in welcoming them. Proponents of banking along the lines of Sharia (Islamic law) claim that the Islamic banking system is “more ethical” than the West’s capitalist system. This is not true. Unfortunately, however, in our age of crashing financial markets, many Westerners – not just the traditional anti-capitalist European left – seem very eager to buy that argument.

Early this month, even the Vatican newspaper Osservatore Romano voiced its approval of Sharia banking. “The ethical principles on which Islamic finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service,” the paper said in a downright stupid and “unethical” article published on March, 4.

The article, entitled “Islamic finance proposals and ideas for the West in crisis” [pdf] suggests that the basic rules of Islamic finance could relieve suffering markets and particularly international financial systems. It says that in the current atmosphere of crisis banks should take Muslims as an example and that the Islamic finance system may pave the way for the establishment of new rules in the Western world.

Islamic or Sharia banks differ from regular banks in two major ways. As commanded in the Koran, the charging of interest is prohibited in all monetary transactions. The other defining feature of Islamic banks is that they are supervised by a board of Islamic scholars and clerics whose job it is to ensure that the banks’ activities comply with Sharia law.

Its proponents argue that Islamic banking is “ethically superior” to the capitalist principles of the “materialistic” West because, as Giovanni Maria Vian, the editor of Osservatore Romano says, Sharia banks take “the human dimension of the economy” into account.

The two dirty secrets of Islamic banking, however, are that, like all banks, Sharia banks do charge interest – they just give it another name – and that the clerics supervising the banks have ties to extremist, even terrorist, groups which work towards the Islamization of Europe and world dominance.

Helena Christofi, an expert on Sharia banking, explains that Islamic banks extend a type of Islamic “credit,” called murabaha, that shifts risk to the borrower in a manner similar to interest.

“An Islamic bank granting murabaha credit to a customer for an automobile, for example, would purchase the automobile for the customer for $15,000 and the customer would owe the bank $20,000 in a year’s time. Similarly, under the ‘diminishing musharaka’ credit, the Islamic version of a mortgage, the bank and the customer purchase the property together. The customer must make monthly payments to the bank and pay a monthly rental fee, both based on the portion of the purchase price the bank still owns. Ironically, the interest this amounts to ranges between one and two percent higher than the interest on a conventional mortgage. Although the resale price of the vehicle and the rent paid on the house are akin to simple interest charges, the banks’ sharia boards legitimate the charges by renaming them ‘commissions’ or ‘profits.’”

The Sharia boards supervising the Islamic banks and Sharia-compliant financial services offered by regular European banks are composed of members of the European Council for Fatwa and Research. This Council is headed by Sheik Yousef Al-Qaradawi, a leader of the Muslim Brotherhood and instigator and financier of terrorism in Europe and the Middle East. Both Al-Qaradawi and the Council have expressed their hope that “Islam will return to Europe as a conqueror.”

With ever larger Muslim populations there is a growing internal demand for an “ethical alternative” to conventional banking for Muslims. A 2006 poll by Lloyds Trustee Savings Bank in Britain found that over 75% of British Muslims want Sharia-compliant banking products, while in 2005 Mufti Abdul Barkatullah, Sharia adviser to Lloyds TSB and an imam at a North London mosque reported that 20% of inquiries into Islamic products at Lloyds TSB came from non-Muslims who have bought the argument that conventional capitalist banking is somehow unethical.

Alun Williams, marketing director of the Islamic Bank of Britain, established in 2004 and one of the first Sharia banks in Europe, told The Guardian (April 2, 2005):

“Our biggest appeal outside the Muslim community will be to those who feel disenfranchised by, and bitter about, mainstream banks. […] Non-Muslims are fascinated by us, the more so because we intend offering […] an ethical dimension.”

That was four years ago. Meanwhile, Islamic banking has boomed all over Europe and interest from non-Muslims has grown in the wake of the financial crisis, which some, such as the Vatican paper, claim is due to the free-market model having “grown too much and badly in the past two decades.”

Sharia principles, however, not only prohibit the collection and payment of interest and investing in companies involved in gambling, alcohol, tobacco, pornography and the production of pork, but also forbid women from opening bank accounts without their husband’s approval. How “ethical” the latter is for the non-Muslims “fascinated” by Sharia banking is unclear. However, Western banks offering Sharia-compliant services to non-Muslims do not seem to insist on barring women. According to Christofi,

“The justification for replacing capitalism with the Islamic model is based on an intentional corruption of Sharia law, but the banks’ clerics don’t seem to mind undermining their theological philosophy, since the ethical image their misrepresentation has created for Islamic banking has managed to spread Islamic ideology to non-Muslims in Britain. According to Al-Qaradawi, Islam’s ideological infiltration into the West will be the vehicle through which it will establish an Islamic government over the entire globe.”

Although Al-Qaradawi and other members of the European Council for Fatwa and Research are connected to Islamist circles, the British government continues to promote the UK as a hub for Islamic banking. Western governments welcome Sharia-compliant banking because of the huge sums this attracts from Muslim immigrants, “ethically”-driven non-Muslims, and investors from Muslim countries.

In December 2008, the French Senate looked at ways to eliminate legal hurdles for Islamic financial services and products in France. French Finance Minister Christine Lagarde announced France’s intention to make Paris “the capital of Islamic finance” and said several Islamic banks would open branches in the French capital in 2009. French sources estimate this area of the financial market is worth from 500 to 600 billion dollars and could grow by an average 11 percent a year.

In July 2007, Wouter Bos, the Dutch Finance Minister (and leader of the Dutch Labour Party), said the Dutch government actively encourages Islamic banking, despite the risk that this acts as a Trojan horse in the Western banking system for groups linked to terrorists.

“In the first place because Islamic banking meets a demand from the Muslims living in the Netherlands. In the second place because we see an opportunity here for the Dutch financial sector. A third reason is that banning Islamic banking from the perspective of fighting terrorism will have a counter-productive effect. Denial of an actual need can lead to money-flows running via alternative channels out of the sight of the government.”

Switzerland, too, wants its share of Sharia banking. Years ago, Swiss banks already opened branches in the Middle East, offering worldwide Sharia-compliant financial products to wealthy Arabs.

In October 2006, the Swiss authorities granted a banking license to the first Switzerland-based bank that operates according to Sharia principles. Others have followed. “There are simply not enough financial products being created in the West for Muslim clients,” says John Sandwick, managing director of Swiss asset management firm Encore Management. “If no effort is made whatsoever, I am afraid the world will pass Switzerland by in the race to control the rich prize: which today is worth hundreds of billions, but in the future will be trillions of dollars of Islamic wealth.” Michael Fouad Chahine of Credit Suisse says “The development of Islamic banking has so far been limited to countries with a higher percentage of Muslims. But this is changing as more international regulators accept the importance of Sharia. It is now also accepted as socially responsible banking.”

How “socially responsible” and “ethical” is it to try to grab a share of the billions of dollars amassed by rich Arabs, while turning a blind eye to the fact that a substantial part of the money is used to promote terrorism and the establishment of an Islamic government over the entire globe?

In one of his sermons, Sheikh Al-Qaradhawi, one of the supervisors of the Sharia-compliant financial services offered in Britain, speaks of “the conquest of Rome.” In view of the recent article of the Osservatore Romano, Al-Qaradhawi’s words sound rather ominous:

“The city of Hirqil [Constantinople] was conquered by the young 23-year-old Ottoman Muhammad bin Morad, known in history as Muhammad the Conqueror, in 1453. The other city, Romiyya [Rome], remains, and we hope and believe [that it too will be conquered]. This means that Islam will return to Europe as a conqueror and victor, after being expelled from it twice […]. In one of my previous programs, I said that I think that this conquest [of Rome] would not be by the sword or armies, but by preaching and ideology. Europe will see that it suffers from materialistic culture, and will seek an alternative, it will seek a way out, it will seek a lifeboat. It will find no lifesaver but the message of Islam.”

Hey, if someone wants to lend money interest free, go right ahead. It’s value to the nation can probably best be seen by looking at Muslim countries that don’t have oil. They are all dirt poor with very little possibility of upward mobility. It’s one of the main causes of poverty in Muslim countries.

[Its proponents argue that Islamic banking is “ethically superior” . . .]

Even if this were true their “purity” won’t last long in the arena they’ve chosen to compete in.

Sharia banking is the exact same thing as Western banking, only they need to jump through a few hoops to put justifications on top of it in order to supposedly make it in line with the Koran.

And taking interest is a sin. For example, drinking alcohol is really only strongly discouraged in Islam, and other minor things are the same degree of offense. But taking interest is a “damnation and hellfire” sin. Basically, they are following the letter of the law to get around this prohibition rather than following the spirit and intent. It’s kind of like a liberal lawyer picking apart the Constitution to see how he can ban all guns without “violating” the Second Amendment.

This might even be a good thing since they are bending their own religion in order to be more like modern Westerners. May be a good trend brewing here.

It’s one of the main causes of poverty in Muslim countries.

I am interested in how it is the cause of their poverty and what might the other causes be. Also, where did you get you doctorate in Middle Eastern culture?

everything you need to know about sharia banking...

“Do you get beheaded for overdrawing at a Sharia bank?”

Not unless you pledged your 72 virgins as collateral.

The real question is: When a muslim woman walks into a sharia bank covered head to toe in a burka, produces a weapon, makes that insane yelping sound, demands all the cash, and dashes out the door.... does it really matter what the video cameras recorded?

An Islamic bank granting murabaha credit to a customer for an automobile, for example, would purchase the automobile for the customer for $15,000 and the customer would owe the bank $20,000 in a year’s time.

The bottom line is that people will find a way to get around the "rules" and then rationalize their behavior. It sort of reminds me of the Catholic version of "fasting" where you can't eat a slice of bacon during Lent, but it's fine to devour a huge seafood platter (anti Catholic comment not!!!).

I gather this is because Islam has so led the modern world and in developing industrialization and the information age.

All those Islamic innovators and inventors! one marvels!

I would love to make Sharia loans, as they benefit the lender immensely. In a modern loan, I loan you $100,000 at 6% interest for 10 years. If you pay on time and to term, you end up paying me $133,225. If you come into money (or refinance into a better loan, etc.) and pay me off in a month, you end up paying just a bit over $100,000.

Sharia loans are 0 coupon (no interest.) You take out a loan for $133,225, which is due in 10 years (actually it would be somewhat more, as the implied interest rate would be higher due to the fact that the loan is a 0-coupon bullet.) I give you $100,000. If you decide to pay me off in one month, you still have to pay me the full principle - $133,225.

I would make that loan every single day.

“Also, where did you get you doctorate in Middle Eastern culture?”

I’m not sure you have to have a doctorate in a subject to have an opinion. I lived in the middle east for several years, but that doesn’t make me an expert either. I have read numerous articles on the subject and a recurring theme was the inability of small businessmen to expand their businesses with loans. Most businessmen in the middle east have to do everything with the capital they have accrued from their startup business. The way most businesses succeed in most part of the world is by borrowing money against assets already gained from the initial business. Under Sharia law one cannot put up any property as a guarantee against losses. It stands to reason that if no one makes a profit from a loan, there aren’t going to be many loans available. Show me a Middle Eastern country that has an upper class based on small and growing businesses. They just don’t exist.

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