Equity investors are allowed to buy only shares from certain industries. For example, insurance stocks are excluded because insurance involves a degree of uncertainty, risk or speculation, known as gharar, which is prohibited. (…) Stocks have to fit a certain financial profile, too. A debt-to-equity ratio of more than 33 per cent is unacceptable.

Thanks, Muslims need more ridiculous ideas to keep them backward.

The development has been driven by economic and political factors. The so-called “war on terror” in the aftermath of the September 11 2001 attacks helped to consolidate a sense of Islamic identity across the Muslim world, prompting many more to seek ways of expressing their religious convictions.

Identity politics turned wrong. Between those “reformers” who think that to be modern, one needs to stop being a Muslim, and those neo-salafis who think that to be Muslim one needs to be an Australopithecus, Muslims really need another proposal. One where not everything is forbidden until proven otherwise for example.

And the rise in the oil price has fuelled an unprecedented economic boom in the Middle East.

This is perhaps one of the greatest contemporary curses on Muslims. That such amounts of capital came through sheer geographical luck into the hands of the most backward among them, making their Bedouin superstitions and backward understanding of the world more visible and wider spread in fertile grounds.

But western banks have also spotted other reasons to embrace the sector. One is the fact that Islamic products can often prove to be distinctly lucrative. For, like any nascent, fast-emerging area of finance, the sector is so fragmented and opaque that it can often produce high margins – particularly where products are not commoditised.

So many suckers.

Moreover, contrary to what a casual onlooker might suspect, western investment banks do not appear to face any significant impediment as a result of their national affiliations – or lack of Islamic roots. That is partly because they tend to distribute their products through local Islamic banks, or act with a local partner.

An interesting remark by a friend who was more bothered by how Islamic banks operated than by the hypocrisy behind Islamic finance: his argument is an analogy with ISO 9001 certified companies. To obtain the label, all the production chain, providers included, must also fit certain quality requirements, preferably be certified ISO 9001 themselves. If a bank is to call itself Islamic compliant his argument goes, it should make sure its whole chain is also compliant.

However, the pattern also reflects a distinctive point about the way that Islamic finance operates: namely, that the religious “brand” of any product typically rests not in the reputation of the institution that has produced it – but with the religious scholars who have approved it. Thus, western banks have entered this field by engaging the service of esteemed religious scholars who can rule on the Islamic merits of products.

An incentive for the “scholars” to pimp the field of Islamic finance.

Unrelated to the FT Alphaville entry, this amusing theoretical case was brought up by the above mentioned friend, illustrating how a zero interest rate can be usurious. The case is based on deflation. When prices are falling, a zero nominal interest rate actually has a real interest component being paid. In theory, if the deflation is really strong, that interest component can be very high, to the point of being usurious even by normal standards.

Say, prices are falling by 20% a year and, in a zero percent nominal rate configuration that the interest-usury confusion illiterates are promoting, you borrow $100. Three years later, the actual value of whatever equivalent commodity is $51, approximately half of the original amount in terms of dollars. If you must give $100 back, then you’ve arguably paid some 25% in interest. Check this out for some much lower rates.

Though cases of deflation are relatively rare, they’re still real enough to make worth bringing them to the attention of the proponents of the interest-usury equivalence for a new ban.