Since the letter I sent on Shariah Finance to Simon Crean and Nick Sherry, in my immediately preceding post, Sherry has made two more speeches on the subject. Dave Clark has written a critique here. I have written the [draft] article below, which I post here and hope to get out to various Aussie press. If you have any comment, send to my email or to fu.saisee@gmail.com.
Don’t drink the Sherry: Naïve Nick’s dangerous delusions
Nick Sherry, the assistant Treasurer, has been hard work promoting “Islamic finance” and the benefits of Shariah law, with three speeches in as many months, spruiking their virtues.
Don’t drink the Sherry: Naïve Nick’s dangerous delusions
Nick Sherry, the assistant Treasurer, has been hard work promoting “Islamic finance” and the benefits of Shariah law, with three speeches in as many months, spruiking their virtues.
According to Sherry, Shariah finance will “increase the depth and sophistication of our financial markets”, “foster social inclusion” and provide “socially responsible investments”.[1]
He slams criticism of Shariah finance as “misinformed… …ridiculous... egregious… …misconceptions”.[2]
How so?
First, Shariah finance will not increase the sophistication of our financial markets, for they are not sophisticated products, are inflexible and were developed for 5th century commerce. Muslim professor of Economics Mahboud El-Gamal says Islamic bonds are “otherwise known as poorly designed bonds… grossly inferior and poorly constructed products for profit”.[3]
Prohibition of interest for “ethical” reasons is nonsense. In the west we ban usury, but put a time value on money: “interest”. This has underpinned the greatest increase in wealth in human history – recent financial crises notwithstanding. To accept that “interest” is bad is a retrograde, unsophisticated, step.
Shariah finance does not “foster social inclusion”, unless by “inclusion” you mean “divisiveness”. To accommodate Shariah finance in Australia we have to change not just our tax system, as Sherry suggests, but also our property laws, our insolvency laws and our security laws.[5] This, by definition and intent makes Shariah finance quite clearly separate, an exception to our principle of “one law for all”.
Shariah finance does not mean “socially responsible” unless by “responsible” you mean “prejudiced”. Let’s grant that not investing in gambling and alcohol may appeal to some Aussie wowsers. But not investing in “new-style pork”? Worse: Shariah finance prohibits investing in products or construction that benefit any non-Islamic religion, or investing in any non-Islamic product or service, such as health and welfare programs for women.
But these are mere quibbles compared with the bigger problems with Shariah finance.
The book Alms for Jihad provides detailed information on the link between Zakat and terrorist organisations. I used to work for the Office of National Assessments; I am confident they could provide even more extensive, detailed information to the Senator. Has he sought this from ONA? Has he made any unbiased, objective risk assessment? If not, why not?
So far, Sherry has relied for his information on delegations made up of Islamic financiers from the UAE and the law firm Zaid Ibrahim & Co (Zico), a firm whose partner Hanim Hamzah is mates with Sherry’s Chief of Staff. Zico’s “primary focus … in Australia is to promote Islamic finance and Shariah advisory services”.[9] From them we expect unbiased advice? Surely a case of the fox in charge of the henhouse.
As for concerns about the aims of Islam, I leave Islamic Shariah finance experts speak for themselves:
Sherry claims – naively – that only a “tiny minority of Muslim extremists” holds these views. When this “tiny minority” includes those who are in charge of regulating and approving Shariah finance, well, “Houston, we have a problem.” But more: ICM Research found in 2008 that 53% of British Muslims believe Islamic values are “not compatible with British values” and 43% believe that the Islamic faith “is not compatible with western democracy”.[13] Is there any reason to think – other than hope – that Australian Muslims would feel any differently than the rest of the umma?
At the very least these views need to be investigated. But for Sherry, these views – from Shariah finance experts overviewing Shariah finance’s global regulatory body, buttressed by of a large section of Muslim society – are simply dismissed or ignored, while those that point them out are smeared as “egregious”. This contumely from a Senator who takes “advice” from the mates of his Chief of Staff and who have a clear vested interest.
This is negligent and a disservice to the Australian people, at best.
Senator Sherry is Assistant Treasurer. Surely this important post requires him to treat very seriously indeed the potential downsides of promoting Shariah finance in Australia. He owes this to the Australian people and to the continued integrity of the Australian financial system he correctly lauds.
I suggest he take a leaf from the book of Britain’s Financial Services Authority (FSA), the regulator of Britain’s the financial services industry:
“The FSA’s attitude towards Shariah finance is that they will not provide any hindrances for it, nor will they provide any encouragement. This is because the FSA is secular in nature and not a religious regulator.”[14]
Hear, hear! That would be a reasonable stance from a truly ethical and secular Australian government.
Peter F is a Hong Kong based investor. He was in the Australian Federal government for 14 years, most recently as a Senior Executive in Austrade for East Asia. He has established companies in Hong Kong and is currently Director of Excel Associates Ltd, a private investment company.
[5] Demystifying Islamic Finance, Zaid Ibrahim & Co, (Zico) May 2010, p 21. “… it is incorrect to say that Islamic finance requires only minimal changes to the financial laws and regulations, as indeed this is only the first step in what should be a long journey…. only feasible if alignment with and support from the rest of the legal system are also stitched together”. [emphasis added]
Sherry claims – naively – that only a “tiny minority of Muslim extremists” holds these views. When this “tiny minority” includes those who are in charge of regulating and approving Shariah finance, well, “Houston, we have a problem.” But more: ICM Research found in 2008 that 53% of British Muslims believe Islamic values are “not compatible with British values” and 43% believe that the Islamic faith “is not compatible with western democracy”.[13] Is there any reason to think – other than hope – that Australian Muslims would feel any differently than the rest of the umma?
Peter F is a Hong Kong based investor. He was in the Australian Federal government for 14 years, most recently as a Senior Executive in Austrade for East Asia. He has established companies in Hong Kong and is currently Director of Excel Associates Ltd, a private investment company.
[5] Demystifying Islamic Finance, Zaid Ibrahim & Co, (Zico) May 2010, p 21. “… it is incorrect to say that Islamic finance requires only minimal changes to the financial laws and regulations, as indeed this is only the first step in what should be a long journey…. only feasible if alignment with and support from the rest of the legal system are also stitched together”. [emphasis added]
[7] Umdat al-Salik, The Classic Manual of Islamic Jurisprudence. h8.1-26. This is the key source for Shariah law.
[10] AAOIFI: Accounting and Auditing Organisation for Islamic Financial Institutions, the regulator of Shariah finance worldwide.
[12] BBC Radio, May 2006. The Arabic term for SCF is al-Jihad bi-al-Mal, which means “Jihad with money”, or “Financial Jihad”
[13] ICM Research, 22-28 May 2008 Pdf here. Postscript (29/9/10): the link is no longer valid. I have searched the ICM site and it appears to have been removed. Why? The ICM site is here, if you would like to do your own search, but meantime I confirm that the figures above were taken direct from the Poll as it existed when I accessed it in May 10. There are many other polls from May 10 and well before that date still on the ICM site. Too uncomfortable for ICM, or their clients, Channel 4 and The Guardian? I suspect so.
