Riyadh, Asharq Al-Awsat- Since launching the first annual conference on Islamic finance eight years ago under the title ‘Islamic Finance 101 Forum’ organized by Harvard’s Faculty of Law under the auspices of official bodies, specifically the US Treasury, Washington has sought to understand the Islamic finance industry and to benefit from it.
However such enthusiasm was not put into effect until 2004 when then Under Secretary of the Treasury for Foreign Affairs, John B. Taylor announced during one of his speeches at the Islamic Finance 101 Forum that the Treasury would set up a program to study of Islamic banking, as well as the appointment of Dr. Mahmoud el Gamal, a professor at Rice University, as Scholar-in-Residence as part of the program.
However, the program was cancelled by late 2004 and US Treasury kept changing its position on Islamic banking until Robert Kimmit, US Deputy Secretary of the Treasury, stated recently on a visit to Saudi Arabia that the American treasury would study the features of Islamic banking in depth in an attempt to benefit from it. This came in response to a question on the prospect of benefiting from the Islamic banking experience to overcome the global financial crisis.
There is no doubt that this statement is important as the US administration, at present, is trying to appeal to finance in the Gulf to help rescue the US economy and its corporations suffering from liquidity shortages caused by the mortgage crisis that has blown the economies of major industrial powers away.
The statement did not pass unnoticed as several research institutions and US right-wing thinkers such as Frank Gaffney, Director of the Center for Security Policy, launched strong criticism against the statement claiming that it undermines the US Administration’s policy on its war on terror. He claimed that Islamic finance supports Islamic terrorism, encourages dictatorships and oppresses freedom. Gaffney called for sending messages to the US Treasury Department to condemn the idea of incorporating Islamic financial policies into the US financial system.
Before establishing the Center for Security Policy, Gaffney served as Deputy Assistant Secretary of Defense under Richard Perle during the presidency of Ronald Reagan. He supported the war on Iraq. Gaffney is characterized as a pro-Likud right-winger who is against anything related to Islam. Perhaps the attitude of Gaffney and others like him from right-wing pressure groups explains why US governments have failed to incorporate elements of the Islamic financial system into the US financial system despite the crucial need for it.
Perhaps this also explains why Islamic banking has failed to rise in the US as there are only four major Islamic financial corporations today, the first being Lariba American Finance House founded in 1986. These corporations serve approximately ten million Muslims, 47 per cent of whom are university graduates whilst this category covers only 26 per cent of the entire American population. The lack of financial institutions offering Islamic financial services, real-estate financial programs in particular, has prevented Muslims from owning houses. No more than 420,000 Muslim families own their homes and this makes up 4.2 per cent of the number of Muslims in the US whilst 65 per cent of all Americans own houses. Freddie Mac bought $250 million in Islamic mortgages in comparison to $1.77 trillion worth of conventional mortgages.
The truth is that I am not optimistic about the future of Islamic banking in the USA owing to the fact that ideology dominates over US decision-making, and especially that the majority of American people are religious, according to a CNN poll.
Moreover, the extreme right plays a lead role in the decision-making process in Washington via its research centres and the pressure groups that are hostile to Islam just like Frank Gaffney. Therefore, America’s opportunity to benefit from the rise of the Islamic banking system will remain limited as long as ideology is what drives US policy-making despite the crucial need for finance to help it overcome the crisis.