In the Capitalist Era, Islamic Finance

 

Money. Money turns the world on its axis, or, more precisely, in any direction you desire if you possess it. Thus, when it comes to easy money, boy, does it destabilize the world! Simple money - money earned without the usual sweat and toil associated with earning a living. Who, at the very least, would not be tempted?

Society and its priorities shift in unison with the passing of seconds. Whereas morality and integrity were paramount in a distant past, society's priority today is amassing massive amounts of wealth. Why not, one might ask? If adding more zeros to a figure on your bank statement demonstrates a greater influence and dominion over the world, then why are you using the guilty conscience card against us?

However, I argue, wasn't it us who established a direct correlation between wealth and influence in the world in the first place? You cannot honestly tell me that this has always been the case!

 Wouldn't you agree that it's past time we embarked on an enlightening journey?

If money were truly directly proportional to influence, then the example of Islam's second caliph, Umar ibn al-Khattab r. a., would be a scientific anomaly!

The Muslims finally captured Jerusalem in 637 AD, following a protracted siege. While the Byzantine Emperor Heraclius fled, Sophronius, the Greek Orthodox patriarch, surrendered the city on the condition that no one be harmed. The conditions were met, and the patriarch presented Umar ibn al-Khattab r.a. with the key to the city.

Umar r. a. entered Jerusalem with dignity to sign the peace treaty, walking alongside his servant on a camel. Umar r. a. and his servant alternated between walking and riding a camel (Muir: 135).

When Sophronius met the Ameer-ul-Mo'mineen, Umar r.a., one of the most powerful men in the history of Islam and the world, he was dressed in his travel-stained battle tunic, whereas Sophronius was dressed in sumptuous robes. Sophronius was taken aback to find the Commander of the Muslim world dressed in anything other than royal robes and even questioned Umar r.a. about his attire, to which he responded that Allah SWT does not "demand extravagance."

The Patriarch then explained that he did not wear the regalia to adorn himself but to 'check the world's confusion and anarchy,' and that he was "God's office." In other words, he had to portray himself as a representative of God through his clothing for appearances' sake. Indeed, it is the concept of appearances that has perplexed us regarding the actual nature of influence. As a result of this confusion, many people have forgotten why lofty appearances were created in the past, even if they were the result of flawed thinking.

Sam Polk, a former hedge fund trader and founder of the non-profit organization Grocery ships, brilliantly examined the reality of the addictive rat race of amassing money in a New York Times article, stating that Wall Street is, in reality, a "toxic culture that fosters the grandiosity of people desperate to feel powerful."

Thus, our society's focus has been narrowed to the single objective of easy money generation. Money that is easily earned is unconcerned with the path or means by which it is reaped. Every professional field possesses ample evidence in this regard; indeed, every professional field has become a microcosm of this issue.

Whether it is a doctor prescribing additional medications or recommending unnecessary laboratory tests in order to earn additional commission; or a judge 'fixing' a case with a politically powerful defendant in exchange for a nomination to the District Court; or even a teacher passing a failing student who comes to his/her house for private tuition; or the role of the media in selectively portraying jigsaws of a scenario that misrepresents the entire picture of truth in order to please a viewer

Everyone, deep down, understands right from wrong. Each of us experiences a pang of guilt as we approach the bus that leads to bribery, dishonesty, greed, and so forth. Initially, the consequences of the conflict between our conscience and our choice are brief. However, with time and consistency, the friction subsides, and choosing the incorrect but easier path to our goals no longer appears to be a source of discomfort.

Indeed, large businesses and governments take calculated steps to eliminate the distinction between the proper and improper methods and/or means of earning an honest living, as this ultimately results in their expansion and prosperity in this chain reaction. Similarly, Islamic finance (diploma in Islamic banking and finance) and the concept of Sukuk - Sharee'ah bonds follow the same pattern.

A conventional bond is a certificate that, once purchased from the issuer, requires the issuer to pay the bondholder the face value in addition to the agreed upon rate of interest upon maturity, or to pay other benefits, such as prizes awarded through lotteries, or payment of a fixed amount, or any rebate. It is an asset-based investment in which the bondholder does not own any tangible assets other than the certificate.

According to the Islamic Fiqh Council, dealing in bonds with the aforementioned terms is haraam (forbidden), regardless of who issued them or what name they are given as a disguise, because they are riba-based loans, and riba (interest) is haraam in Islam.

Islam expressly prohibits dealing in interest in any arrangement because it is deemed to be an act of exploitation. In Islam, anyone who contributes to the capital of a business should be entitled to ownership of the associated assets and be an equal bearer of the assets' profits and losses.

Muslims have voluntarily dealt in interest, despite the fact that it is prohibited in Islam, due to the allure of easy money. However, a sizable number of Muslims have deliberately avoided this path, adhering to their religious doctrines to the letter. This was clearly a significant setback for banks and interest-based businesses. To accommodate the large segment of the Muslim population that shuns interest-based money, the big fish in the world of finance came up with the idea of "Islamicizing" banks and other concomitant businesses, and thus bonds as well.

What began as a sincere attempt to establish Islamic banks, which met with enormous success among the Muslim masses, quickly devolved into a capitalist rabbit hole. Today, the only distinction between conventional banks and Islamic banks is whether or not the term Islamic is included or excluded. Islamic banks offer identical products to conventional banks, with the exception of the difference in terminology between English and Arabic.

Semantics, on the other hand, does not qualify as a religious seal of approval and, frankly, explains nothing. No matter what color a spade is, it is still a spade. The reality is that 97% of the world's money is intangible, created not by governments, but by banks through loan transactions. Our bank statements are the only place where we see this money. As a result, if banks were to develop Islamic finance products, it was clear that they would not be based on physical cash, as it existed only in electronic form.

Sukuk (bonds) are also a characteristic of "Islamic" banking, having been widely endorsed by a number of Islamic banks. In recent years, the Sukuk market has exploded in size, reaching billions of dollars in market capitalization. Thus, CNBC dubbed 2014 the year of Sukuk bonds.

Historically, what distinguished Sukuk (bonds) from conventional bonds was that the purchaser of Sukuk became the legal owner of a portion of the issuer's/some asset. The purchaser is then permitted to lease back to the issuer that portion of the asset(s).As a result, tangible assets should be preferred over intangible assets. This concept appears to be significantly more secure than the conventional bond, which utilizes electronic money as a substitute for hard cash.

It was not the fact that Sukuk were fundamentally different from conventional bonds that made them so popular; rather, it was the fact that they were backed by religious scholars that catalyzed their meteoric rise. Since Sukuk issuers did not adhere to this traditional concept but instead created a modified version of Sukuk bonds in which the buyer does not acquire ownership of the assets purchased, Sukuks were just as intangible as conventional bonds, which violates Sharee'ah.

Shariah law precludes unethical financial practices by definition. 

Additionally, it promotes equitable wealth distribution throughout society in order to alleviate poverty and inequity. This is reflected in Islamic law's prohibitions of excessive speculation, gambling, and investing in products deemed harmful to society (alcohol, pornography, etc.). The structure of Islamic financial products and services, particularly its prohibition on speculative transactions, has aided the industry in avoiding the brunt of the global financial crisis's negative consequences. Institutions such as the International Monetary Fund and the World Bank have praised the governance model of Islamic financial institutions as an ethical alternative. Economic experts have suggested that Islamic financial principles can be used to promote financial inclusion and thus raise the standard of living in developing countries. Additionally, Islamic financial principles can contribute to global financial stability and economic development.