Ramadan Prayer Day 8 – Business: “The Influence of Islamic Banking in our Nation”Posted: July 27, 2012
The term “Islamic banking” refers to a system of banking or banking activity that is consistent with Islamic law (Shariah) principles and guided by Islamic economics. The Financial Times recently published an article regarding Islamic banking. The article portrays shariah compliant finance in our banking systems as ethical, however by western standards one would question those ethics.
Shariah Finance Watch has compiled a list of financial institutions active in the United States that have a tie to shariah compliant finance along with entities that do not offer financial products but play key roles in enabling shariah compliant finance in our nation. This list includes AIG, Bank of America, Barclays, Bloomberg, Century 21, J.P. Morgan Chase, CitiBank, The Coca-Cola Company, Dow Jones, GE Capital, Harvard Law School, HSBC, International Institute of Islamic Thought, NASDAQ, and Standard & Poor’s.
Shariah compliant financial products are, as the name indicates, governed by Islamic shariah law. A product is determined to be compliant based on the approval of one or more Islamic scholars who serve on an advisory board for any institution offering shariah compliant products. The financial transactions cannot involve “impure” activities that include alcohol, pork, tobacco, gambling, pornography and western defense, and they cannot charge interest. Most importantly 2.5% of the assets of a shariah compliant instrument has to be donated as “zakat”. The Islamic scholars, serving on the advisory boards, determine how to distribute this money.
Zakat is giving a portion (2.5%) of one’s wealth to charity and is one of the five pillars of Islam. The money can be distributed between eight categories: the poor, those short of money, zakat workers, those who hearts are to reconciled, slaves purchasing their freedom, those in debt, those fighting for Allah and travelers needing money. The phrase, those fighting for Allah, means, “people engaged in Islamic military operations for whom no salary has been allotted in the army roster” (Reliance of the Traveller h8.17 p. 272). Those fighting for Allah are given money even if they are wealthy which is to be spent on weapons, clothing and other expenses including supporting the fighter’s family.
Although zakat is found in the Qur’an, Islamic finance cannot be found in the Qur’an or the hadith. Islamic leaders in fact invented it in the 1940s and 1950s. Abul A’al al-Mawdudi and Sayyid Qutb – both who desired to insulate the Islamic world from western civilization wrote about Islamic economics, but at the time Islamic financial products did not exist.
The idea of Islamic financial products did not take root until the Arab Oil Embargo in the 1970s when countries such as Saudi Arabia, Sudan and the United Arab Emirates developed large banking institutions. The nation of Iran began to dominate the industry after the 1979 Islamic revolution and today 6 of the 10 top shariah compliant financial institutions are actually Iranian state banks.
There are only around two-dozen shariah scholars who serve on the advisory boards of shariah compliant financial institutions around the world. These scholars sometimes serve on the boards of competing institutions, which would be considered a conflict of interest in the western world.
Mufti Taqi Usmani was the chief of the Dow Jones shariah advisory board and the chief of HSBC’s shariah advisory board. After it was uncovered that Usmani believed Muslims in the West had a duty to rise up in jihad against their Western neighbors and had served as an officer of the madrassa in Pakistan that gave birth to the Taliban, he was replaced by his son.
Sheik Yusuf al-Qaradawi, spiritual leader of the Muslim Brotherhood has been on the advisory boards of many financial institutions. This includes a bank called Al Taqwa based out of the Bahamas. The bank had an association with a real estate investment firm called BMI based in New Jersey. Both were shut down by the US Treasury Department for sending funds to finance terrorism.
PRAY FOR BUSINESS:
- Shariah compliant banks and institutions have poor standards for disclosure and transparency. U.S. policy makers, regulators and Wall Street are not equipped to handle the research necessary to investigate. Pray that God will bring forth His Truth to reveal anything that is hidden and reveal to American banking officials the concerns of Islamic banking in our nation.
- Pray that any zakat funds that go to financing terrorism against western nations will be uncovered and challenged.
- Pray that Muslims giving money to zakat will be made aware of exactly how their money is being spent.