Capital Markets

Le Fric, C'Est Moi: Does Islamic Banking Threaten French National Identity?

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Needlessly infringing on people's rights + making France poorer = double fail.

French President Nicolas Sarkozy runs into trouble in the race for petrodollars, as members of his own party derail a plan to liberalize banking rules to make room for sharia-compliant (no-interest) banking. From The Economist:

In a global recession, Islamic finance looks an attractive business. Worldwide sharia-compliant assets grew by 29% over the past year to $822 billion, according to The Banker. French officials fret that Paris is missing out on its share, particularly to London, whose multicultural approach gives an open-arms welcome to Islamic investors. To catch up, the French have pushed through changes to their tax and legal codes. But their latest effort has prompted a political backlash.

The fuss began when an amendment was tacked on to a draft bill on the financing of small firms to give legal rights to holders of sukuks, or Islamic bonds, "to conform with the ethical principles of Muslim law or sharia." Socialists were aghast. It was nothing less than "the introduction of sharia into French law!" exclaimed Henri Emmanuelli, a Socialist deputy. By slipping the amendment into an unrelated text, said another, "it could give the impression that we want petrodollars, but we don't want to advertise it." Traditionalist members of Nicolas Sarkozy's centre-right party were also upset. The constitutional council, France's highest court, seems to agree. Last month it threw out the amendment, albeit on technical grounds.

Unfortunately, where France is concerned, you can't assume the default position is in favor of individual rights. So it's not clear why allowing non-interest-bearing banking requires an amendment. The more you intrude public power into private decisions (including the elementary decision of what a person can do with his or her money), the more you turn every issue into a zero-sum game of what-will-they-think-of-us-if-we-back-down? 

Good thing we live in a country where the government would never nationalize the banking sys… er, um… So, yeah…

The Financial Times sounds a note of caution on the newly acquired western taste for finances based on hard assets:

But perhaps we need to reflect back on one the key drivers of Islamic finance, the oil boom. The last five years of rising oil prices have allowed the Gulf States to enjoy robust growth. However, the global downturn could threaten oil prices and reduce the year-on-year growth that these countries have enjoyed. Already, the global downturn has led to a collapse in property prices in Dubai, where many Gulf Islamic banks invested heavily, and are now suffering as a consequence.

A survey also showed that the industry faces a number of challenges. A shortage of expertise in the industry and a lack of regulatory harmonisation were seen as the biggest obstacles to growth, both being cited by more than 40 per cent of respondents.

Nearly one-third also referred to a lack of demand among Muslims. This could be attributed to education or concerns that Islamic finance is not seen as being competitively priced.

A few years ago, Reason interviewed Imad A. Ahmad of the Minaret of Freedom Institute. Among many other interesting points, Ahmad contrasted American secularism (yay!) with French secularism (boo!); speculated that lending at interest was a major cause of Christendom's phenomenal rise from the Renaissance onward (and that lack of it contributed to the Ummah's relative stagnation); and even asserted that there is no Islamic prohibition on interest:

Basically, this so-called quranic prohibition is a little more complex than it seems, in that the Quran does definitely prohibit riba, which is usury. The question is: Is all interest usurious? Although 99 percent of all Islamic scholars have said it is, I simply believe they're wrong. And I make that argument using not only economics but the example of the Prophet and his companions. Even the majority of Islamic scholars, contrary to the claim that all interest is usurious, will allow certain forms of interest. For example, they'll allow a vendor to offer a discount for cash or surcharge for credit. This is interest; there's no way of getting around it. That tells you that interest is not inherently forbidden.

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  1. The Minaret of Freedom Institute? What next – The Synagogue of the Final Solution Institute?

    1. The Synagogue of the Final Solution Institute

      aka J-Street.

  2. wise guy-

    the minaret of freedom is actually a pro-freedom, libertarian-leaning islamic institute. check their website.

  3. Question: how do no-interest banks make money? Do they charge depositors fees?

    1. I doubt they charge you to deposit your money with the bank.

      Withdrawing it, OTOH…

    2. There are numerous ways of getting around this while still allowing the lender to turn a profit. One of the more common methods is for the “lender” to buy and control the asset, and then the “borrower” gradually acquires the asset through a rent-to-own arrangement:

      http://en.wikipedia.org/wiki/Islamic_banking

    3. They charge interest on loans and pay interest on deposits. They just pretend it’s something else.

      The bank could, say, buy a house, and then sell it to you for a series of fixed payments over thirty years for example. The bank didn’t loan you any money; it bought an asset and resold it. No interest was charged; the bank just resold it for a profit. (There are generally a few hoops to jump through about the bank taking constructive ownership and whatnot to make it less obvious that it’s a simple mortgage, restrictions on penalties/late fees, etc.; these vary depending on how strictly the jurisdiction wants to be pretending there wasn’t a loan.)

      Similarly, the money paid on deposits can be accounted as a gift from the bank to its customers. Since it’s a gift, there’s no way to enforce the payment of it. However, a bank that doesn’t make the gift will watch depositors withdraw their money and put it in banks that do reliably make the gift.

    4. One of many ways around this prohibition of “usuary” is to have a rent-to-own situation, where the lender buys and owns the asset, and the borrower makes payments to gradually acquire the asset, at a price that allows the lender to turn a profit that is not called interest, even though it really is a form of that.

      Google “islamic finance” (tried to post a link, and it got rejected by this site’s fucking spam filter)

      1. And yet all of Lonewacko’s links seem to make it through…

  4. Although 99 percent of all Islamic scholars have said it is, I simply believe they’re wrong.

    Isn’t that going to get you killed, oh 99 percent of the time?

    1. Spoken like a true “outside slave”. Islamic banks have a variety of fin. instruments to accommodate credit worthy individuals and companies, and are lending to them as we speak. Lending and operating in the U.S. in parallel to conv. banks. Unlike conv./ member banks, there losses have not been “socalized” by Fed. stuffing GSE’s, Fannie & Freddy,eith toxic loans and making “outside slaves” like you & me pay for it. Read up and connect the dots yourself. Step one toward freedom!

  5. SORRY BUT ALL ISLAM IS HORRIBLE AND ANTI FREEDDOOM, THIS “ARTICLE” IS ANTI AMERICAN, ROCK FLAG AND EAGLE

    1. Spoken like a true “outside slave”. Islamic banks have a variety of fin. instruments to accommodate credit worthy individuals and companies, and are lending to them as we speak. Lending and operating in the U.S. in parallel to conv. banks. Unlike conv./ member banks, their losses have not been “socalized” by Fed. stuffing GSE’s, Fannie & Freddy,with toxic loans and making “outside slaves” like you & me pay for it. Read up and connect the dots yourself. Step one toward freedom!

  6. It would appear that Muslims miss out on the power of compound interest.

    1. “And through the discipline of good planning and the miracle of compound interest, you should be able to build wealth for yourself, a better future for your family, and a secure retirement.” – Hillary Clinton

      Allah alone is capable of Miracles, Blessed be his name.

    2. But not the power of compound explosives.

    3. They distain interest, it’s against their laws. They seek shares of P/L.; buy & sell back to home buyer over time at fixed price, don’t foreclose in a default but buyout or liquidate and distribute equity shares to defaulting buyer, they take an “at risk” position and “joint tennancy” on title. In short they operate on a higher plane!

  7. If the lender makes more money from lending the money than from putting it under the mattress…sounds like ordinary blasphemous Jew banking to me. Tricks like getting the loan for a larger amount than would be required if paying cash aren’t fooling anyone who doesn’t want to be fooled.

    1. It’s called “Capitalism’, free Enterprise; they have been at it far longer than there has been a U.S..

    2. Long live the memory of Andy Jackson, the greatest of all U.S. Presidents. He shut down the cartel known as the Federal Reserve.

  8. More French fun thanks to Drudge:

    Web site’s cash handout stunt horrifies French minister

    “This kind of behavior by companies horrifies me,” [French Budget Minister] Woerth told Radio J. “They’ve done this in the United States but that’s no reason to do it in France.”

    1. And of course by “fun” I really mean “retardiculousness”

  9. Sharia law should be fought every place — especially America!Free apostates: Fight Shari Law, Rally for Rifqa

    “There’s no need to fear. Underzog is here!”

    The Stars and Stripes Forever

  10. Underzog, do you do everything angrily? Do you stab your scrambled eggs with your fork? Do you leave the shower with your penis red hot and sore to the touch? Has the scheming, murderous Ay-rab got you so worked up that you can’t even play a song on the piano without the white-hot fury of a thousand suns?

    Try smoking some pot, man. It’ll calm you down. Also, It’s what turned everyone here from a Republican into a libertarian.

    1. Pat did nothing for me, Mr. Akston.

      It made me paranoid once and blah the next time years later.

      As I am a humanitarian, I hope marijauna has some medical purposes; e.g., chemo, muscular sclerosis; etc., but I can’t see another drug being legalized.

      You will take offense at this no matter how I say it, but reading the so-called arguments against me by my buds here, I am very reluctant to change our drug laws (except for those unconstitutional seizures and mandatory sentences).

      p.s. The piece was arranged by Vladimir Horowitz. It is quite difficult — even Horowitz stopped playing it after awhile; however, I think someone should try to play it. Even if my politics colors the remarks of the Reasonoids toward my playing.

      “There’s no need to fear. Underzog is here!”

  11. speculated that lending at interest was a major cause of Christendom’s phenomenal rise from the Renaissance onward (and that lack of it contributed to the Ummah’s relative stagnation);

    You can imagine the embarrassment of all the medieval popes who commanded the nations of Europe to fight against Islam in every military way possible, while simultaneously ordering anyone who argued in favor of allowing interest-charging on loans to be bound in chains and flogged daily for the rest of their lives.

    1. Er, Tulpa, the Middle Ages happened before the Renaissance? Didn’t they?

      Although you are getting at something. The loss of Papal power following Clement VII underscored his inability to help unify Europe under Charles V and launch a crusade against Suleyman’s Ottoman Empire. Suleyman was ultimately stopped in Austria by a loose confederation of non-obedient Lutherans and Zwinglians with the Catholics, not by Papal Decree.

      Indeed that lack of central authority really set Europe free.

      1. Yes, I am aware that the Middle Ages came before the Renaissance. My point is that Ahmad’s argument, if true, would mean that the triumph over Islam that medieval popes sought by force of arms was actually accomplished in the end by the hated “usurers”, not by knights in shining armor.

        1. In other words, the Jews saved the Western Civilization they created in the first place. No good deed goes unpunished!

  12. I thought it was ideas and technologies borrowed from the muslims that led to the success of Europe following the crusades. I also thought that the “knights in shining armor” (and white satin) such as the knights templar were the ones that “discovered” the way to do banking without being technically usurous.

    1. The Venetian City State was actively trading with the Ottomans when East and West were at arms.

      I would say that free trade had more to do with it. An increasingly fractured Europe with less tribute to Rome is what made the difference.

      With the Reformation, the Pope no longer had Europe by the spiritual and financial balls. Kind of an early form of Big Govmint bad vs Small Govmint good.

      1. Actually the Western Schism, which preceded the Reformation by over 100 years, also helped to weaken the temporal power of the papacy.

  13. From a Joe Biden point of view, people with Islamic mortgages are more patriotic than those who pay interest on the money they borrowed.

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