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Islamic finance could be a growth industry

By Maria Bhatti - posted Thursday, 30 July 2009


The world is on the brink of facing an economic and environmental disaster due to the financial crisis and global warming, yet we are focusing on the type of clothes a woman may choose to wear. As an Australian Muslim woman, I found it horrifying to listen to the French President’s statements about the burqa being a sign of subservience and oppression. Be it Muslim men such as Sheikh Hilali or the French President, it’s a serious crime against womankind when men choose to speak on behalf of women, especially in regards to their choice of clothing.

Even more horrifying was the recent hate crime in a German court when Marwa el-Sherbini, now known as the “hijab martyr” was stabbed 18 times in front of her three-year-old son. Her crime? She chose to wear a headscarf - an innocent act of devotion to God. Furthermore, just recently a Muslim woman wearing a face covering was told by a Sydney bus driver to “take off her mask” before entering the bus - a severe infringement on her rights.

In my opinion, if leaders such as President Sarkozy continuously choose to focus on representing Muslims in a negative light, such Islamophobic actions will only be encouraged. Those who make no effort to understand Islam and its extensive intellectual history will never be able to embrace an intercultural attitude and instead, hatred and ignorance will be rife. With scepticism in my heart, these recent headlines made me wonder, “Will I ever be able to witness a world in which Islam is understood for its depth and scholarship, rather than items of clothing which only touch the surface of what Islam truly means?”

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Thankfully Islamic finance saved the day. I was recently involved in organising a symposium on Islamic finance held on July 6, 2009 and titled “Islamic Finance and the Global Economic Crisis”. Senator Nick Sherry, Assistant Treasurer of Australia and Dr John Hewson were a couple of the main speakers at this conference which was organised by the National Australia Bank in conjunction with La Trobe University's School of Economics and Finance and Muslim Community Cooperative Australia Ltd. It was held at the InterContinental Melbourne, the Rialto in order to provide networking opportunities and raise awareness of the opportunities this US$1 trillion industry had in Australia.

Many key companies from the legal and commercial industry were also present at this symposium including PwC, Mallesons Stephen Jacques, Freehills, The Islamic Development Bank, Kuwait Finance House and Dubai Islamic Bank. It also marked the launch of the first ever Masters Program on Islamic Banking and Finance at La Trobe University in Australasia.

It finally made me proud to see the community focusing on more significant issues, such as the global financial crisis rather than revitalising old and tiresome debates about Muslim women’s clothing. Islamic finance has recently risen as a topical debate in Australia due to its resilient nature in the current financial market. In comparison to its Western counterparts, the Dow Jones's Islamic financials index rose 4.75 per cent in the most recent September quarter. It is also reported that the Islamic finance industry is growing at 15-20 per cent, which is faster than any other subset of global banking. Many argue that this is due to the fact that Islamic finance does not invest in high risk products such as complex derivatives.

Furthermore, the government has indicated its support for this industry. Former Assistant Treasurer and the recently appointed federal cabinet minister, Senator Chris Bowen, used the Islamic Finance industry as an example of an untapped opportunity for Australia. “I think there's great opportunities such as Islamic finance,” he said. “The majority of the world's Islamic population lives in Asia, and Singapore and Kuala Lumpur are trying to corner this market for themselves and I think Australia can play a role. Even if we only take a small percentage of the market it could generate a lot of wealth and a lot of jobs in Australia.”

The Islamic financial and economic system is based on Shari’a rulings, which have traditionally governed such transactions based on the Koran (Muslim holy text) and the prophetic tradition. The main difference between the Western and Islamic financial systems is that the latter prohibits interest (riba), any form of uncertainty or speculation (gharar), and also prohibits investment in the following industries: alcohol, swine products, weapons, gambling or brothels.

Instead of charging interest, Islamic finance relies on “profit-and-loss-sharing” (PLS) and this is based on concepts such as: trustee finance (mudaraba), equity participation (musharakah), cost plus financing (murabaha), leasing (ijara), payment financing (bai bi-thamin ajil) and hire purchase finance (Bai’ Al-Takjiri). A number of banks in the United Kingdom have Islamic windows offering Islamic financial products and in 2004, the Islamic Bank of Britain was established to offer wholly Shariah compliant products. The murabaha model is used in the UK retail market to structure Islamic mortgages. Under this method, the bank purchases the asset with the customer, the rent charged is benchmarked according to market interest rates and the customer pays back this rent over a number of years.

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This system has not been adopted by any Australian banks; however the Muslim Community Co-operative Australia has been set up as a financial service for Muslims and non-Muslims and operates under the Islamic system. Also, the NAB has recently introduced Muslim-friendly loans known as Qard-Hasan (benevolent loans) which provide loans of up to $1,000 to help customers finance household items.

Will Australia follow the UK approach or will anti-Muslim sentiment block the intellectual debate this system deserves? I am not advocating a revolution in our current economic system; I am simply encouraging Australia to follow UK’s lead and provide further intellectual space for dialogue and debate on Islamic finance. I also believe the media’s focus needs to be shifted to how the religion can better help society through its rich intellectual history on issues such as the global financial crisis, rather than discussing burqas and headscarves lest we fall into witnessing horrific hate crimes such as the one Germany recently faced.

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About the Author

Maria Bhatti is a postgraduate student in International Commercial Law at the University of Melbourne, a member of the Muslim Women’s Council of Victoria and was recently involved with LaTrobe University in organising the Islamic Finance Symposium.

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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