Thursday, 4 December 2014

Low profit and weak standards hamper Islamic banks, say experts - Your Middle East

The reason for that low profit would be the inefficiency inevitably a result of having to structure deals to comply with Sharia. That makes them more cumbersome, convoluted and crappy.
That's the nature of islamic finance. It's hypocritical because it has to try to be profitable (as all businesses do), but it can't do by the simple method of putting a cost on money (aka interest), because that would be "usury". So islamic finance structures deals that involve a sale and buy-back of assets generating the same return as the current rate of interest, but with much more paperwork and cost. In short, costly hypocrisy.
Actually, Muhammad didn't quite say that all interest was usury. But that's how it's chosen to be seen in today's resurgence of Islam. The promoters of islamic finance want to distance themselves from anything western, as they do with all other spheres of western life.
Hence this conundrum.
Go Sharia.
Go inefficiency and cost.
But, they made their bed...
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