Yesterday’s New York Times Business Day Section had a major article reporting on Shariah Compliant Finance, “Islamic Banks, Stuffed with Cash, Explore Partnerships in West.” In late October 2013, we posted on the Iconoclast about cheerleading that UK Prime Minister David Cameron gave at the London meetings of the World Islamic Economic Forum extolling the virtues of making the City, “the unrivaled Center for Islamic finance.” In that post, we drew attention to some of the demonstrable problems that the UK had encountered over the past five years accommodating “Islamic Economic Imperialism,” the term used by Christopher Holton, Vice President for Outreach at the Washington, DC-based Center for Security Policy and editor of Sharia Finance Watch.
The New York Times article noted the mushrooming growth of the global Shariah compliant financial market place:
Over the last 30 years, the Islamic financial sector has grown from virtually nothing to over $1.6 trillion in assets, according to data from the Global Islamic Financial Review, an industry publication. The financial crisis has only encouraged the growth. Industry assets grew 19 percent in 2011 and 20 percent in 2012, in contrast to the less than 10 percent growth at non-Islamic banks in most of the world.
Until recently, Islamic banks have largely put their money to work in the Middle East — or, if they invested in other parts of the world, in real estate. Real estate is among the most popular investments under Islamic law, also known as Shariah, because a deal can be structured that does not require interest payments, which are prohibited by Shariah. But as the banks grow larger they are looking for new, more diverse places to put their money.
Coincidentally, Holton, see our March 2013 NER interview with him, sent us a recent video of his presentation on Shariah Compliant Finance at an event sponsored byChildren of Holocaust Survivors of Los Angeles (CHSLA) on December 18, 2013, “Shariah Compliant Finance and Jihad with Money.” Watch the CHSLA presentation of Holton, here.
Holton made several telling points to his lay audience. He said that the term Islamic Finance, the term of art used in the international financial and investment banking community, is cover for Shariah compliant finance aimed at perpetrating stealth Jihad via a sophisticated call to Islam. It connotes so-called “ethical investing” given compliance with the totality of Islamic Shariah and Qur’anic doctrine. It is all about using the cover of the greed factor that undergirds capitalism in the West.
He gave some background of Shariah compliant finance going back to the writings in 1940 of Maulana Maududi, the Indian-born Pakistan Islamic scholar, extolling the virtuesof Islamic Economics as part of an Islamic revival in the 20th Century. There were similar soundings about the benefits of this in the writings of Sayyid Qutb in the 1940’s and 1950’s. Qutb was a member of the Muslim Brotherhood who provided the underpinnings for the Jihadist doctrine that had its manifestation in Al Qaeda. We also note that Hassan al Banna, Egyptian school teacher and founder of the Muslim Brotherhood in 1928 like Maududi and his disciple Qutb, viewed Islamic Economic Imperialism as a counterweight.Joseph Spoerl in an NER article, “The World View of Hasan al-Banna and the Muslim Brotherhood” noted that al Banna said:
The entire Muslim world is being corrupted by Western decadence: Muslim countries are being flooded with Western capital, banks, and companies. The founding of the Muslim Brotherhood in 1928 is often explained as a reaction against Western imperialism. For Islamic imperialism al-Banna has only the most effusive praise.22 Imperialism to impose Islamic rule on non-Muslims is altogether to the good. Al-Banna is fully aware that Islam was born not only as a religion but also as an imperialistic ideology mandating the conquest of non-Muslims.
Al-Banna began a network of banks in Egypt and elsewhere that met the Qur’anic standards that prohibited interest payments as usurious.
Holton explains as vast areas of the Muslim Ummah from Morocco in the West through the Arab heartland to South Asia and the Indonesian Archipelago were Western colonial possessions with Western banking commercial and industrial enterprises. There were few independent Islamic countries of note until the post World War Two era when independence movements swept these areas. It was oil, and especially the 1973 and 1979 Oil Embargoes and the establishment of the OPEC Cartel that suddenly filled the coffers of Muslim autocrats and gave rise to trillions of petro-dollars for recycling.
Holton noted that the current market for Shariah Compliant finance including instruments like Sukuk or Islamic bonds has virtually doubled between 2008 to 2012, from $800 billion to over $1.7 trillion. Given UK PM Cameron’s announcement at the World Islamic Economic Forum in London in October 2013, the Shariah Compliant Finance market looks ready to kick into gear with the underwriting of a $324 Million Sukuk sovereign bond issue. Historically, the Iranian Islamic regime since the 1979 revolution has become the largest center of Shariah Compliant Finance. Holton noted that Iranian banks held the top rankings of the leading 500 Islamic finance institutions in the annual Islamic Finance Review by the UK-based publication, The Banker.
That according to Holton gave rise to providing oversight and clearance of ‘ethical’ Sharia compliant investment that met the so-called Qur’anic interest payment prohibitions. That meant turning to Islamic scholars like Muslim Brotherhood preacher Yusuf al Qaradawi in Qatar, Mufti Tami Usmani in Pakistan and others in Malaysia. They became advisors to Western investment groups, such as al Qaradawi did with Dow Jones that had established an Islamic Investment Index. In the case of Hong Kong Shanghai Bank Corporation (HSBC) initially retained Usmani as Islamic legal advisor for its Amanah funds program. Western investment groups did not care a fig about what Shariah is, what they wanted was someone of alleged Islamic legal background to certify that the investment was halal. The problem was that there were not many of these Shariah experts around to satisfy the growth of Islamic Finance and it lead to evident growth problems and conflicts of interest. There was virtually no due diligence let alone disclosures about Shariah doctrine and especially about zakat.
Zakat as we have written in an NER article on the relation to terrorism is the annual tithing of charitable contributions to Muslim charities. One of the eight purposes of which is support for the way of Allah, Jihad. Holton illustrated the later referencing a Shariah compliant real estate mortgage firm based in New Jersey, BMI, that prior to 9/11 had zakat funds directed via an offshore Islamic bank to the Egyptian predecessor of Al Qaeda controlled by Ayman al Zawahiri.
Conflicts have occurred as many of the limited supply of Islamic scholars have forced Islamic finance investment fund sponsors to employ them among competitive sponsors. He noted that both Al Qaradawi and Usmani had additional problems because of their support for terrorist groups like Hamas in the case of the former and the Taliban in the latter instance. Usmani as Holton pointed out had formed the largest Madrassa in Pakistan that harbored the Taliban. Moreover in the instance of Usmani, when HSBC was advised to cease advisory relations with him, the bank simply resorted to retaining his son. Dow Jones didn’t seem perplexed about retaining al Qaradawi for its Islamic Finance Index, despite Qaradawi’s being barred from entry by the US Government.
One peculiar instance that Holton noted was an American convert to Islam who is cited as an advisor to one of the Islamic Finance groups in the New York Times article, Yusuf DeLorenzo. He is featured reviewing a rail car finance deal for Continental Rail to make sure that the cars to be financed wouldn’t carry pork, alcohol or tobacco. DeLorenzo, Holton points out was born a Catholic raised in Massachusetts, who after a year at Cornell University left to find his bliss in Islamic Pakistan. He converted to Islam becoming a Shariah scholar and advisor to President Gen. Mohammed Zia- al Haq, arch Islamist, who perpetrated the bloody Jihad civil war in former East Pakistan in 1971 that morphed into what is now Bangladesh.
Holton cited examples of US government and major legal education institutions in the US complicit in promotion of Shariah Compliant Finance. In 2008, the Bush Administration had the Treasury Department sponsored a conference in conjunction with the Islamic Finance Project of Harvard Law School on the topic of Islamic Finance 101. Holton had attended a seminar on the subject at one of the seminars of the Islamic Finance Project at Harvard Law School in which he observed that at best the participants had a nodding acquaintance of the term Shariah. He also interviewed a former Treasury official involved with terrorism finance who had joined HSBC after being fined $1 billion for engaging in illegal transactions with Iran’s oil program. The person evinced little interest or knowledge about Shariah.
Perhaps the best comment at the conclusion of the New York Times article is by Mr. Ibrahim Mardam-Bey, a group president at Washington, DC-based investment firm Taylor-DeJongh. who observed:
That some American businesses were hesitant to take money from Islamic banks, perhaps a byproduct of negative associations with Shariah since the Sept. 11 attacks. But in the Texas deal, and in many others, that tends to fade as the financial possibilities become clear.
“The borrower was a Texan wildcatter who couldn’t spell ‘sukuk,’ ” Mr. Mardam-Bey said. “But at the end of the day when I brought the check he didn’t care if I prayed to Allah. He just wanted the money.”
EDITORS NOTE: This column originally appeared on The New English Review.