I'm afraid I didn't find that terribly helpful. While it's true that some muslims are confused about the permissibiliy of lending institutions turning a profit, it's not helpful to a muslim trying to do the right thing to say that Islamic banks are merely charging interest by another name. Islamic banks avoid charging money for lending money - interest - by buying the item you want from the seller and selling it back to you at a higher price. I understand their commonality: they both take an identical rate of profit for enabling purchases of homes, cars, etc, but they are different in principle and religion is concerned with principles. What I would like to understand better is how Islamic banks such as those established in UAE and Malaysia are different from conventional banks. Like, while there is an Islamic alternative to home and car finance, some other modern financial instruments are still out, like credit cards. That sits well with me - I think we can all hold hands and agree credit cards are the work of the devil :D

This article in the American adds to what you're talking about.

it's not helpful to a muslim trying to do the right thing to say that Islamic banks are merely charging interest by another name

I'm at loss here. It's not helpful to a Muslim telling him what is actually happening? Besides, what's doing the right thing?

I understand their commonality (...) but they are different in principle

I'm sorry, but this is really bs. They are not different in any way practically, Islamic banks are just packaging their supply to match a very ignorant demand. With inefficiencies added.
Item plus, principles are totally wrong when they're based in ignorance and cause trouble. I fail to see which principles in Islam condone this.

I'm just wondering if anyone who would find this entry useful would actually be reading this blog.

Ah.

Well.

They both take an identical rate of profit for enabling purchases of homes, cars, etc, but they are different in principle and religion is concerned with principles.

No, one is a matter of dressing up what is effectively the same economic risk in other legal terms, which is the very opposite of principle. Rather it is the triumph of appearances over principle. Principle would be to follow the spirit of injunctions, and have good regulation against usurious rates, etc.

What I would like to understand better is how Islamic banks such as those established in UAE and Malaysia are different from conventional banks. Like, while there is an Islamic alternative to home and car finance, some other modern financial instruments are still out, like credit cards.

There are such things.

Just like there are floating rate sukuks.

That sits well with me - I think we can all hold hands and agree credit cards are the work of the devil

No, credit cards are a tool like any other. Used improperly they do bad, used properly they provide liquidity that vastly eases the purchasing habits of the ordinary consumer.

"I'm just wondering if anyone who would find this entry useful would actually be reading this blog."

I do. Even lapsed Muslims feel the pangs of religious conscience in regard to this subject. I particularly appreciate part VIII and the distinction between interest and usury; the former can actually be productive while the latter is damaging to both the individual and the community. If riba is understood in its sense of excess, then a middle ground can be found.

I will pass it on, and thanks for writing it.

That was awfully patronizing. Your analogies are not so strong or useful. I'm not particularly convinced that the law of supply and demand is as natural and unavoidable as gravity, nor by the (wrong and insulting) generalization that finance is to Muslims today what medicine was to Medieval Europeans. The only informative part was part VIII, but even then I disagree that "normal interest rates carry no such injustice." What is normal? I think interest rates can still be quite abusive, though I don't think they are inherently.

In any case, I think the entire religious framework of this article is flawed. Not having a house does not mean you are impoverished, especially if in return for the house you are going into debt. The only difference is you live in a more comfortable setting, but you're still financially weak. I don't see, either, how owning a house contributes to the Muslim community's "well-being"--I would think that Muslims would prefer to think of their communal well-being in terms of faith and religiosity, not material success.

"Muslims believe that understanding religion must be done in light of science and thought." Well, not all of them.

"Those who believe in enjoining the good and advising against the evil should pass this on to whoever might be concerned." I just think this is cheesy. You've gone from a how-to guide to dealing with finances to a normative claim that this is the good, and otherwise is evil. What??

Patronising mate? Shaheen Bey is a value creating entrepreneur from the Ikhouane.

More useful than ten parasitic so called Mouallemine.

But to your complaints:
I'm not particularly convinced that the law of supply and demand is as natural and unavoidable as gravity,

Well, mate, then you need, to be quite frank, learn some goddamned economics - not merely belief, but data based 3lm. There's no doubt in the world that as a social "law" describing how real socio-economic interaction occurs in natural circumstances, supply and demand is a law.

The role of morality should be to shape that, not to deny it, if you want religion and morality to real meaning, not merely be hypocritical posturing (see Iran).

nor by the (wrong and insulting) generalization that finance is to Muslims today what medicine was to Medieval Europeans.

What's objectively wrong mate?

I think l-Akh Shaheen has hit a sore point rather, since in fact the analogy seems fucking spot on, the only insulting part is admitting the truth.

The reality is that observational / descriptive economics and real experience has proven out the basic precepts of market economics as a social science. There are certainly discussable points with respect to prescriptive economics, in terms of prescriptions based off of pure versus behavioural economics predictive frameworks (which are, however, flavours off of general liberal economic frameworks that emperically prove out in grosso modo).

The realities are clear - and more than one tries to deny the general socio-economic realities, the worse the results.

And denying realities for religously driven fantasies perfectly describes both medieval Euro-Xian approaches to science and medicine, and modern "Islamic" fantasies in finance.

What's worse, false reasoning is sold as morally correct and "3lm" based correctness, and then the grotesque dupery of legalistic playing with contracts that is Islamic finance is sold as more religiously correct, selling to the gullible and unlearned Muslim the more expensive, less efficient exact economic equivalent of the "Western" financial instrument.

In Common Law there is a tradition of looking to the "reality" of the economic transaction, not its mere form, in order to render real justice. Islamic finance is opting for facade over reality. Someone supra called that "principle" - I call that mounafiqa and kadhaba, but your mileage as the saying goes, may vary.

The only informative part was part VIII, but even then I disagree that "normal interest rates carry no such injustice." What is normal?

Market (in free, balanced markets) rates are normal. One can observe a variety of freely negotiated rates with enough actors such that mathmatical probability science indiates they are "normal" in the sense of balancing.

I think interest rates can still be quite abusive, though I don't think they are inherently.

Well, any market that gets out of whack (and markets can get out of whack due to internal reasons, not just human, read governmental, reasons).

As such, a certain degree of science driven - that is data and objective fact driven, not abstract non-science driven moralism - regulation is useful and helps stabilise the markets.

In any case, I think the entire religious framework of this article is flawed.

Perhaps.

But then Shaheen has merely restated other scholars, such as Timur Khan, so if his scholarship is flawed, he certainly shares the error with a long line of Muslim rationalists.

Not having a house does not mean you are impoverished, especially if in return for the house you are going into debt.

This statement makes no sense.

Rental versus buying is a question of balancing cost.

Debt as a means to provide upfront liquidity to finance an equity position, versus ongoing payment is utterly the same (ex transaction and taxation costs) as chosing between buying and leasing - two "Halal" transactions, except for a few transactional detials, and the question of, if you do not have the up front equity (a real constraint, that leads in the real world to slums and under-funded sub-standard housing due to near term equity constraints), funding.

The only difference is you live in a more comfortable setting, but you're still financially weak.

That is simply illiterate, like a communist talking about labour exploitation.

I don't see, either, how owning a house contributes to the Muslim community's "well-being"--I would think that Muslims would prefer to think of their communal well-being in terms of faith and religiosity, not material success.

Abstractions.

Misery clearly drives all kinds of behaviour that the moralists find objectionable - thus one finds in the poor regions either violent radicalism or immorality.

Economic stability allows stable social relations - we live in a physical world, and one of the positives of Islam has been not denying as Xianity had the habit of, the relationship between the material world and the spiritual (of course not one to one...).

You seem to want - and this goes to Shaheen's painful but obviously correct observation - of reproduction in the modern Islamic world of medieval Xian obscurantism. Queer, to copy such obvious errors.

"Muslims believe that understanding religion must be done in light of science and thought." Well, not all of them.

Indeed. Sadly not all of them. Only those aware of the great tradition and profit that the community took from that productive tradition.

"Those who believe in enjoining the good and advising against the evil should pass this on to whoever might be concerned." I just think this is cheesy. You've gone from a how-to guide to dealing with finances to a normative claim that this is the good, and otherwise is evil. What??

In light of wanting the Islamic world to advance, to regain its tradition of enlightenment and improving its status, rather being an impoverished, obscurantist dependecy blaming others for its own, largely internally driven failings.

But then Shaheen has merely restated other scholars, such as Timur Khan
Ok, now this is starting to be helpful. Do you have any articles by Timur Khan that you'd like to share?

They are not different in any way practically, Islamic banks are just packaging their supply to match a very ignorant demand. With inefficiencies added. Item plus, principles are totally wrong when they're based in ignorance and cause trouble.
Look, if they're not any different, then what are you upset about? And if they are different, in your estimation worse, then can you kindly demonstrate why that is so? Islamic banks in Malaysia appear to be competitive with the conventional kind. Is that not the case? Less shouting and more information please.

Do you have any articles by Timur Khan that you'd like to share?

L. meant Timur Kuran I think. Google him up.

Look, if they're not any different, then what are you upset about?

They aren't different in the sense they don't avoid what they're pretending to avoid, interests that is. But they do spread ignorance and associated inefficiencies by making a perfectly acceptable and needed economic phenomenon look evil.

If you're into one of the most common forms, murabaha, there's no practical difference, as long as it's on relatively small transactions, it's just the underlying hypocrisy which is really dislikeable. Murabaha is when for example a bank buys the asset you want and sell it back to you with a mark-up corresponding to the interest. On a bigger scale, it's not workable. You need to get liquidity and be able to manage it directly in most situations. The bank's role is not to assume costs of managing that liquidity and that is not even desirable (are you going to provide the bank with a schedule and a shopping list?).

Another approach that "Islamic" finance uses is using musharaka, which simply means partnership. Banks act like venture capitalists in this case. First, the required return in venture capital firms is a lot higher than the one required on your average loan, because it reflects a much higher risk. This means it disqualifies zillions of projects that could otherwise get funding through conventional means with lower return requirements. Second, it implies banks being more actively involved into managing your business and therefore incur additional costs that go beyond the usual ones for conventional financial intermediaries. Then, not all businesses want to fund themselves through equity. This is a huge topic, issues range from dilution of capital, to loss of control, to protecting your IP, etc.

Now the world of finance is full of instruments and transaction types that I'm sure one can waste much energy in trying to disguise, but those instruments are the way they are because they answer specific needs. So either you're just going to merely rename them, which would probably be unacceptable to the cavemen who don't want to hear about conventional finance, or you're going to wrap them up and introduce some inefficiencies like the ones described above in the process.

You have to understand why your argument isn't catchy to the religiously observant. Take halal meat for example. You could argue that halal meat is no different from the conventional variety because the animal still dies and winds up on your table, and the nutrition it provides to you is the same. It may even be worse because the extra time and care necessary to slaughter in a halal manner means inefficiencies and a more expensive kilo of beef. Bravo, QED. The problem is in the foundational assumptions: do we live our life according to revelation or according to whatever the most cost-effective method may be as declared by an army of bean-counters? If you want to sell your ideas to a religious person you had better come with an argument that pays attention to religious principle, not curse us as hypocrites and liars.

Oops, sorry, posted before I saw Shaheen's response. Thanks, Shaheen, that makes a bit of sense. Can you answer why Islamic banks in Malaysia appear to be competitive with conventional ones? Even non-muslims in Malaysia are investing with Islamic Banks. You better believe they wouldn't be doing that if they weren't seeing healthy returns.

L: I am not convinced, by this article, that that is the case. I think any idiot on the street can tell you the basics of supply and demand, so to pretend that this is not a pattern that everybody already understands is kind of assumptive, I think. The article takes this as an assumption. Since it claims to be addressing an illiterate, naive, or otherwise clueless audience, I don't know if unsupported assumptions like this are so exemplary of the "scientific" approach this article claims to be taking.

As for the Medieval analogy--aren't a number of the Gulf states some of the most important centers of capital around the world? I am not exactly sure who this article refers to. It does not offer any empirical examples to clarify what it's talking about.

My reference is NOT an abstraction. One of the great problems in economists and other materialists in interfacing with religious ideology--and I am not talking about religious folk, but people who ascribe to the ideology in their outlook--is that they assume the religious ideology has the same materialistic goals. If Muslims believe interest or other procedures to be haram, convincing them that these things are economically beneficial is NOT going to solve things. You need a religiously-inspired rationale supporting them, which is what the article barely touches on in part VIII, but what it needs to focus on if it wants to be a "primer" for Muslims and financing. This is not "abstraction" that can be discarded. It's common sense.

I still stand by my criticism of the last line. This is what I was referring to when I spoke of the "religious framework." You can't have what is essentially a secular argument, with scant theological evidence mentioned (though that which is is quite interesting), and close it with a paraphrase of parts of the Qur'an and consider it to be religiously convincing. It's not--I think it's weak, and I think many people would see through this.

For what it's worth (and it shouldn't be worth much, anyway, but if it is, says quite a bit about you), I am not attacking this article from a theological standpoint. I am an atheist.

In any case, I meant my comments in good faith, and I was only explaining why this article was not convincing--not offering a rebuttal or alternative position.

If you want to sell your ideas to a religious person you had better come with an argument that pays attention to religious principle /
You need a religiously-inspired rationale supporting them

Which is what I did in part VIII. Avoiding interest by disguising it is just legalese make up (hyal) if it was really what was prohibited (which it isn't, usury is, so that makes it hypocrisy - nifaq - instead), and it doesn't answer the goal (maqsid) of the prohibition (the injustice that comes with usury). There's simply no way of avoiding interests in any organized society with an economy.

Now I know there are chimpanzees who think being religious means following obscurantist half-wits, even though that's not what the Quran says (verses 12:2 - the word there in Arabic is ta`qiloon-, 16:11,44, 25:44, 33:67, 47:24, 59:21 and many more invite you to use your brain and warn you against blind following, quite litterally against being like cattle), or forgetting about the worldly (which is not what the Quran says either, see 28:77).

So? I can fake with the tone to make it sound as religious as it could be, to the point of diluting the initial argument and take the same posture as those interest-forbidding illiterate preachers. There are whole books about this, but you have to cut somewhere, especially on a fast food article for people who didn't do their religious diligence in the first place. There will always be morons who won't listen anyway, who will only measure religiosity by the number of burdens and prohibitions you impose on yourself. Those are not the audience I'm aiming at. I'm aiming at the reasonable Muslims, conservative or not, the ones who think Islam is not irrational and Muslims need more rational management of their affairs, not more obscurantism. If you're not one of these, then this entry is definitely not for you. And you'd be wrong to assume there aren't many of those - many of whom do need some education when it comes to finance.

Can you answer why Islamic banks in Malaysia appear to be competitive with conventional ones?

I have honestly no idea whatsoever about Malaysia. Do you mean they're competitive in their offer or do you mean they're healthy businesses? (if you meant the former I really am curious as to how they wrapped their offer).

Even non-muslims in Malaysia are investing with Islamic Banks. You better believe they wouldn't be doing that if they weren't seeing healthy returns.

I have no doubt that Islamic banks can be very healthy businesses, there's a real demand for their products. That there's a demand is a problem, because said demand is misguided and consumers pay more than they should for what they actually get, which diverts resources from other needs, and is one point of this entry. That the suppliers of those products expand their business by trying to discredit - or worse, lobby to forbid - their conventional competitors exploiting ignorance and spreading it is unhealthy for Muslims, is another point of this entry.

That forbidding interests is merely impossible is the main point, so people who think their neurones are meant to be used should get over it and take a better look at the Quranic injunction about usury.

I think any idiot on the street can tell you the basics of supply and demand

We wish. You're giving humanity more credit than it deserves, I know quite a few who can't.

Addendum: You can't have what is essentially a secular argument

You are confusing secular and rational. My argument is definitely NOT secular, not any more than Islamic finance's. Islamic finance presents itself as a field of science, a rational approach to finance, only morally superior. There isn't much more religious to it than the common misconception about interests equating usury. I am not trying to debunk the religious injunction about usury, I'm dealing with the non-religious confusion about interests. So, I'm showing it for what it is, rationally, not in a secular way.

Do you mean they're competitive in their offer or do you mean they're healthy businesses? Both, as far as I can tell. Banks here are rushing to open Islamic subsidiaries. Other financial innovations, like the Tabung Haji (pilgrims fund - a savings bank for prospective hajjis) and the state zakat systems are worth looking at too.

There are whole books about this, but you have to cut somewhere, especially on a fast food article for people who didn't do their religious diligence in the first place.

Great, well if your goal is putting out fast food for lazy people then I'd just be insulting myself to come over and read, wouldn't I? That's too bad. Look, if you just want to have a LOLMULLAHS!!1! moment with like-minded people than you're welcome to do so. The architects of Islamic finance in Malaysia hold advanced degrees in economics from secular institutions, and they have good manners to boot. I'll give them the benefit of the doubt until I see convincing arguments otherwise. For the sake of anyone stumbling across this place, here is Prof. Kuran's homepage with lots of articles available. I'm off to read them instead. Kthxbi.

Great, well if your goal is putting out fast food for lazy people then I'd just be insulting myself to come over and read, wouldn't I?

Afraid you misunderstood. If this leads you to take some further reading, I cannot but encourage you to do so. My point was, most people who take the interest-usury equivalence stance are people who definitely didn't do their diligence well on this point. Many - if not most - will not do the effort, and this entry was already long enough for them. The idea is you present them with an easily consumable digest, which by itself goes deeper than the commonly held misconceptions on the issue. For many this is good enough. If it dispells that misconception for even one person, then this entry will have achieved its goal already. If it helps bringing some into investigating it further, it will have gone beyond. It doesn't pretend to give full explanations to those who'd like to know more, though if someone needs more pointers, I'd be glad to oblige.

The architects of Islamic finance in Malaysia hold advanced degrees in economics from secular institutions

Of course, to provide a profitable financial offering, islamic or not, you need to have a good background in financial engineering. Again, I have no doubt about the educational quality of the people who make a business out of it. I wouldn't say the same about the educational quality of those sheikhs who promote the confusion that creates that demand.

Both, as far as I can tell.

Can you be specific and give me an example of "islamic" financial instrument which is more competitive than its conventional equivalent?

Oops, sorry, posted before I saw Shaheen's response. Thanks, Shaheen, that makes a bit of sense. Can you answer why Islamic banks in Malaysia appear to be competitive with conventional ones? Even non-muslims in Malaysia are investing with Islamic Banks. You better believe they wouldn't be doing that if they weren't seeing healthy returns.

The answer is that Malaysian Islamic banks have not gone through a full economic cycle, so their real competitiveness isn't clear.

Egypt had a boom in this sort of banking twice. Each time the Islamic banks rode up the cycle well, but on the down cycle, collapsed. That is, they performed worse on the down cycles stressing than did conventional banks.

Have Malaysian banks under "Islamic branding" found better risk management and work arounds? Maybe. The other question, of course, from the consumer point of view is overall transaction efficiency. Again, with a captive audience willing to suck-up higher margins and higher marginal cost on any given transaction, one can be profitable, but that doesn't mean it's a "good thing" for the consumer.

However, my personal point of view is that if a large percentage of the population has sucked up obscurantists khayali rot, and that's the only way to bring them financial services that are reasonably modern, well fine.....

However, if you're an educated Muslim, you should know better.

Yaman
L: I am not convinced, by this article, that that is the case. I think any idiot on the street can tell you the basics of supply and demand, .... The article takes this as an assumption. Since it claims to be addressing an illiterate, naive, or otherwise clueless audience, I don't know if unsupported assumptions like this are so exemplary of the "scientific" approach this article claims to be taking.

Eh?

This is utterly incoherent. I fail to see the objection. What's "unsupported" - supply & demand?

As for the Medieval analogy--aren't a number of the Gulf states some of the most important centers of capital around the world?

Important centres of capital in the sense of New York or London, no.

The Gulf states are important centres of liquidity, of excess capital from rents on raw natural resource extraction, oil and gas in particular, that is pumped on to other parts of the world to be transformed into value.

It's dumb money. Nothing in particular that the Khalijis have done is generating profit, the mere fact of extraction - run in reality almost entirely by foreigners, and historically with foreign capital, although has changed - is not value creation.

I am not exactly sure who this article refers to. It does not offer any empirical examples to clarify what it's talking about.

I have no idea what your objection is about. Shaheen's post? The Bin Gregory article?

My reference is NOT an abstraction. One of the great problems in economists and other materialists in interfacing with religious ideology.....is that they assume the religious ideology has the same materialistic goals.

A fair point, although you miss the fact that Shaheen tied his response to Islam's concern for the material as well as spiritual well-being of its adherents.

If Muslims believe interest or other procedures to be haram, convincing them that these things are economically beneficial is NOT going to solve things.

True.

However, again, Shaheen rather clearly indicated that there is perfectly valid reasons for rejecting the interpretation on religious as well as practical grounds.

I still stand by my criticism of the last line.

In any case, I meant my comments in good faith, and I was only explaining why this article was not convincing--not offering a rebuttal or alternative position.

I am sure you did mean the comments in good faith, but I think you're off base.

Now returning to bin Gregory
Both, as far as I can tell. Banks here are rushing to open Islamic subsidiaries. Other financial innovations, like the Tabung Haji (pilgrims fund - a savings bank for prospective hajjis) and the state zakat systems are worth looking at too.

Opening up Islamic "windows" to capture clients willing to pay above the going rate for services marginally less-efficient than standard services is good business. Profitable even.

It says nothing about long-term competitiveness and viability of the approach through economic cycles.

Let me take the murabaha example. Leaving aside the nifaq angle, the legal "scratch your ear by twisting around back of the head" facade imposes extra costs. It is, to be short, less efficient. Now, inefficiencies can be overcome, and sometimes volumes can overcome transactional inefficiency.

It does me that on strictly comparable loan/deal sizes (with similar / comparable volumes), the loan dressed up in obscurantist clothing is more expensive. That imposes a cost on the economy - what we would call in economics a dead-weight loss.

In the long run, it imposes a needless drag on Muslims following what in certainly my and Shaheen's opinion are mere hypocrisy.

But again, stepping away from my irritation in seeing what are effectively economically identical operations in terms of real risk and economic interest dressed up as "Halal" (and needlessly stigmatizing rational economic interest with the same brush as usury), if such tools bring people into the financing system that they would otherwise avoid.... well, okay. It's better than nothing. Stupid, but better than nothing.

The architects of Islamic finance in Malaysia hold advanced degrees in economics from secular institutions, and they have good manners to boot. I'll give them the benefit of the doubt until I see convincing arguments otherwise. For the sake of anyone stumbling across this place, here is Prof. Kuran's homepage with lots of articles available. I'm off to read them instead.

Yes, they've created a very profitable industry off of the backs of two oil booms and a particular point of view.

In my opinion, though, having sat through financing meetings where such experts in Islamic finance doing a deal with a certain big international talked about building a variable rate into a Sukuk structure....

Well, the opinion I have is clear. Perhaps it could be more polite, but some things don't deserve much politeness.

I found this of value (if not total agreement with the statements made) - and funnily for me, found myself completely agreeing with Lounsbury's
statement: "No, one is a matter of dressing up what is effectively the same economic risk in other legal terms, which is the very opposite of principle. Rather it is the triumph of appearances over principle. Principle would be to follow the spirit of injunctions, and have good regulation against usurious rates, etc" - indeed.

I have to say though that I thought Mufti Taqi Usmani covered a great deal of ground, and while critical of many of the same points stated here, shows some critical understanding of *why* muslims want an interest-free system, and a methodical reasoning that those who wish to dispute the point would do well to reason with.
http://www.albalagh.net/Islamic_economics/riba_judgement.shtml

Not all muslims who loathe the credit system are unreasonable people who want to drag economics back to the desert and sacrifice it. (I yself have no problem m with using credit cards if one pays according to one's limit in one's account, and then it becomes,as Lounsbury says, a tool)

Dawud:

Not all muslims who loathe the credit system are unreasonable people who want to drag economics back to the desert and sacrifice it.

I'd say most are not. However, I'd say that equally most who support the "Islamic" finance system are seriously mistaken.

Oh, and apologies all around, somehow I always recall Kuran as Khan.

"Well, mate, then you need, to be quite frank, learn some goddamned economics - not merely belief, but data based 3lm. There's no doubt in the world that as a social "law" describing how real socio-economic interaction occurs in natural circumstances, supply and demand is a law."

More to the point, supply and demand is the most efficient method of allocating resources. There are, of course, lots of other ways of allocating resources. But, under ordinary circumstances, all of them are vastly inferior to supply and demand.

This is quite similar to the "Islamic democracy" discussion of a few months ago. You can put arbitrary constraints, like prohibitting interest, on free markets but any such economy will, all else be equal, be less efficient than an economy that doesn't enforce such constraints. To put it another way, any country practicing "Islamic" economics will always fall behind countries that do not.

There is nothing wrong with making a trade-off with economic efficiency in order to advance some other goal. Every country does it, to one extent or another.

The problem I find with "Islamic" economics is that much of it is so appallingly cringe-worthy. It's all too often based on some religious admonition which people then attempt to back-fill with logic in order to pretend that it some sort of sense. Typically, it doesn't. I had a quick look through this Pakistani judgment prohibitting interest and it's a case in point. Much of it is just eye-rollingly stupid from an economic perspective.

Dawud,
that judgment you linked to, the judges really need some introductory courses to economy and finance, it's so full of totally illiterate statements. Their whole economic analysis is totally, absolutely disconnected from reality and based on sheer ignorance. It would be too long to go through each statement. They totally ignore the structure of interest rates, take the value of a principal for granted, live in a world of fantasies where a modern economy can work without loans, ignore in total contradiction with economic theory and practice the impact of risk, call some of the instruments to manage it "unnatural" and "evil" or even hallucinate about the "evil" effects of interests.

You can see their opinion was already made through the biais displayed when they translate verse 2:275 by replacing the word usury by interest. They reject any possibility to reconsider interpretations in light of progress (The fact, however, is that the Holy Qur'an has hardly given a legal definition to any one of its prohibitions. (...) Should we, then, say that none of these concepts has a specific meaning and all these injunctions are therefore subject to ever-changing whims based on "space-time situations"?), interpretations about which they’re very selective by the way (one could cite many other interpretations against the usury-interest equivalence for example, e.g. The Riba-Interest Equivalence: Is there an Ijma (consensus)?). This goes in line with their rejection of rationalism ([the Quran and the Sunna] did not rely on the rational assessment of the people, nor did they leave these transactions at the mercy of human reason) which as I mentioned above is in contradiction with the Quran. Those are people whose describing as medieval is definitely in order.

Now, I can’t take into account every illiterate mumbling, the scope of this entry is limited. All I can do is try to present at least some of the basics of finance and economy (as in science) and debunk some of the most common religious misconceptions in that light in a way that is accessible to the average Moe. The basics above should be enough to have at least some grasp at economic realities and related Islamic injunctions against usury, or to invite to at least proceed with your own scientifically informed religious due diligence. But if Moe prefers the superstitious ramblings of a bunch of illiterate Cro-Magnons, I can’t do much for Moe.

Anon

No significant trend is pimping Islamic democracy in the same way Islamic economy is brought (and those who do do talk about Islamic democracy usually are trying to add an identity element to modern concepts to sell it better, not reject modern concepts based on identity elements). So you're really fighting a non issue there.

Shaheen

Thanks Akhouia, btw, can we pow-wow on our amigo at Obiter Dicta whose intellectual honesty and extremely sporting nature I value as rare and extremely valuable in our world, but whose economic politics horrify me.

Ha, you gave me a good laugh. I noticed that before, I read his blog on a regular basis but I had never posted. Answered him on that entry.

Well, a convo here on these issues, esp on reflexions on Maghreb I think would be interesting.

[Fixing copyright violation]

Source of the article: Malaysia Transforms Rules For Finance Under Islam

You can either buy it or read it at your nearest library.

Cashed (but probably illegal) copies can also be found by googling it.

Besides engaging in copyright violation, which I shall shortly rectify, is there a point?

a good article on why muslims are pressing for Islamic banking and the effects of this pressure:

http://shaukani.wordpress.com/2007/04/28/the-west-and-islamic-banking/

Revealing: Ultimately Islamic banking and finance is about the emergence of a distinctively Islamic form of capitalism that may co-exist and interact with Western, Chinese, Russian or any other capitalism.

It's nothing but identity politics.

It's nothing but identity politics

was my line, not in the article. If anyone was in doubt. Heh.