This morning's South China Morning Post ran my letter about sharia finance, in full:
No place for 'sukuk' bonds in HK market
I refer to the article ("Bonds of faith", November 15), on Hong Kong's issue of its first sharia-compliant bonds (or sukuk).
It paints these sukuk in a completely positive light, but that is not the whole story.
Sukuk are inefficient. Many Islamic banks promote a ban on usury as it accrues interest. But no bank can work for free, so deals are structured with sale and buy-back of artificial "assets" with profit margins at levels equivalent to prevailing interest rates.
The pre-eminent Muslim scholar of sharia finance, Timur Kuran, notes that all Islamic banks actually give and take interest routinely, using "ruses" to make interest appear as a return for risk.
In short, they are an elaborate ploy of form over substance, and inefficient because of that structure: sukuk have fees up to 20 per cent higher than standard.
Is it right that we, the taxpayers, should be expected to pay for this inefficiency by exempting taxation on the transfer of underlying assets, an exemption not granted to any other financial instrument?
Sukuk are discriminatory. Banned investments include not only alcohol and gambling. They are also not permitted to invest in companies that benefit non-Islamic religions; companies that promote equal rights for women and gays; companies involved with Western books, films or media; and companies linked to Israel.
Is it right for Hong Kong to promote manifestly anti-Semitic, homophobic and misogynist financial instruments?
Sukuk are an Islamist programme. Sharia finance was first promoted by the Pakistani Islamist Sayyid Al-Mawdudi, founder of the radical Jamaat-e-Islami, in the 1960s. It is promoted today by Islamists like influential Egyptian cleric Yusuf al-Qaradawi as being "jihad with money".
According to Professor Kuran, "Mawdudi's aim … was to reassert Islam's importance … [to] defy the common separation between economics and religion… to invoke Islamic authority." Sharia banking, he says, boosts the global movement of Islamism. Is it right for Hong Kong to support the work of global Islamists?
Sukuk perform badly. As for sharia finance's alleged success, that is moot: In the UK, sharia-compliant banking has been a huge flop.
Our government should reconsider its support for an innately inefficient, discriminatory and poorly performing religious financial product.
Peter F... etc..