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Islamic Banking in the West: Conviction or Need? - ASHARQ AL-AWSAT English Archive
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Riyadh, Asharq Al-Awsat- Following the collapse of the Lehman Brothers, which was like a precursor to the global financial crisis from which the world is suffering today, several Western countries rushed to invite Islamic financial experts to discuss principles of the Islamic banking industry and the legal prerequisites for attracting Islamic capital and Islamic financial institutions to invest in these countries.

Countries that once opposed the establishment of Islamic financial institutions on their soil were the first to enact laws to allow such institutions to operate, such as France and Australia. Even the United States, which has long opposed amending laws or creating new ones especially for Islamic banking, has announced that it is considering using Islamic banking to fight the global crisis, according to the US Secretary of the Treasury Robert Kimmitt.

Are these statements and initiatives presented because people believe that the foundations upon which Islamic banking is based could cure the crisis, marking the very first merger between such foundations and the legal system governing the banking industry in the West as some have claimed? Or is it just to make the most of the capital of this industry to save the capitalist system? Are these nothing but commercial slogans that are meant to attract these finances?

The correct answer lies in finding out the position of Western societies and government on partially applying Islamic Shariaa to some aspects of Western life. We all remember the violent response the Archbishop of Canterbury Dr. Rowan Williams received when he said “the adoption of some elements of Shariaa law in Britain seems unavoidable.” He based his opinion on the fact that Britain is seeking to be a centre for Islamic finance; however other clergymen called for the archbishop’s resignation. The official spokesman of British Prime Minister Gordon Brown was also quick to highlight the importance of British laws based on British values. He said, “Our general position is that Shariaa law cannot be used as a justification for committing breaches of English law, nor should the principles of Shariaa law be included in a civil court for resolving contractual disputes.” The British press was also quick to mention that the European Court of Human Rights in 2001 stated that Islamic Shariaa differs to European values. As a result, I, as well as other analysts and experts, believe that the West’s celebration of Islamic finance is not due to its confidence in the competence of the foundations the industry is based upon but rather due to the West’s need for the liquidity that this industry has to serve as a lifejacket for capitalism that is drowning as a result of the financial crisis. This was also expressed by Samir Abdi, head of the Islamic Financial Services at Ernst & Young in Bahrain, who told Al Bayan newspaper based in the UAE that “Islamic banking would be more welcomed by the West now because of the current global financial crisis and the West’s need for liquidity.”

Al Eqtisadiyah newspaper carried an article by Robert Morley that read, “America is going cap in hand to Middle East oil exporters. What government officials are not telling you is this: Islamic money comes with strings attached…America will increasingly have to comply with Shariaa law, and what that entails isn’t pretty.” It is amazing that Washington is embracing a set of foreign laws that could entail radical changes to American lifestyle.

However, some people might not like this opinion and might ask: what about the calls made by some journalists and opinion editorial writers for considering and applying Islamic Shariaa in the financial sector? The issue has reached the highest religious authority in the West, as the Vatican newspaper urged Western banks to adopt the moral ethics of Islamic banking. I cannot agree more.

I believe that such statements can be divided into three main groups; the first group is completely convinced that the rules of Islamic Shariaa can protect the markets from financial crises, and this group is the smallest. The second group is merely a reaction to the shock of the financial crisis whilst the third group is motivated by exploiting the crisis to curb the influence of secularism on society, according to the Vatican newspaper. The ethics of Islamic banking, which the Vatican urged other banks to adopt, are values that all religions share. As a result, we notice that the aforementioned demand used the term ‘moral’ not ‘Shariaa’, as the Vatican’s position on Islam as a religion and on Islamic law is well known and no rational being would believe that the Vatican would call for adopting Islamic Shariaa law.

In reality, these calls had no impact, as no Western state studied the foundations of the Islamic banking industry to incorporate it within the amendments to laws governing their financial industries. This proves that the aim of the welcome received by Islamic banking was [to attract] the liquidity enjoyed by this industry, not confidence in the competence of this industry in remedying the causes of the crisis. Therefore, the Islamic banking industry should make the most of the crisis by achieving its ultimate interests rather than temporary ones, such as being recognized by international organizations e.g. the Bank for International Settlements and trying to get the Western states to endorse its own laws such as tax laws, ownership laws and amending supervisory laws in line with this industry’s criteria, and not to be deceived by this celebration that may not last very long, as this depends on its ultimate incentive.

Asharq Al-Awsat

Asharq Al-Awsat

Asharq Al-Awsat is the world’s premier pan-Arab daily newspaper, printed simultaneously each day on four continents in 14 cities. Launched in London in 1978, Asharq Al-Awsat has established itself as the decisive publication on pan-Arab and international affairs, offering its readers in-depth analysis and exclusive editorials, as well as the most comprehensive coverage of the entire Arab world.

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