Monday 5 July 2010

"Islamic finance abroad, not for HK homebuyers"

Letter to South China Morning Post (Postcript: published as below)
Akhtar Hussain can indeed continue to be a devout Muslim and buy a home here. (“Islamic finance abroad, not for HK homebuyers”,SCMP, Jul 04 -- see below).
Despite what his Mufti advises, the Koranic injunction is not on interest, but on Riba, which is translated in all 11 major Koranic translations as “usury” (NOT “interest” in any one of the translations).[1] In one of the verses (3.130) it is hinted that usury is defined by 100% interest, a far cry from the 3% available locally.
So called “Islamic finance”, or Shariah finance, is not mandated for Muslims, unless they wish to highlight Islamist leanings.  It was Pakistani Islamist, Sayyid Abul-Ala Mawdudi, [that's him above] founder of the radical Jamaat-e-Islami, who created the intellectual basis of Shariah Finance in the 1960s. Until then the whole umma got along quite happily with conventional finance. Shariah finance has been pursued since the sixties by Islamist-leaning bodies. In promoting it here in Hong Kong, Mufti Arshad is knowingly or not promoting that Mawdudi agenda, which professor Timur Kuran has characterised as aimed to “invoke Islamic authority in a domain that modern civilization has secularized”.[2]




If our government were to seek to promote Shariah finance in Hong Kong, it would need not only to change our tax laws, but also our property laws, our insolvency laws and our securities laws. This entails a cost on the rest of society, which we should not have to bear.
Far better, surely, for us to adopt the stance of the UK regulator, the Financial Services Authority: “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.”[3]
And far better for Mr Hussain to go to his local HSBC for a loan, with no guilt that he is going against a bogus “law”.
Peter F,
HK

[1] Verses with “usury”: 2.275, 2.278, 3.130, 4.161, 30.39. Translations here.
[2] Timur Kuran, “Islam and Mammon; the economic predicaments of Islamism”. Princeton University Press, p. 52.
[3] Islamic Law: An Introduction to Shariah in the UK, In Brief, June 2009. Here.
As run in SCMP, 11th July
(click to enlarge)












Islamic finance abroad, not for HK homebuyers  






Michael Martin
Updated on Jul 04, 2010 






He was born and bred in Hong Kong, but as a devout Muslim, Akhtar Hussain can't buy a home here.
Banking giants like HSBC and Standard Chartered offer Islamic mortgages structured to comply with the tenets of the Islamic faith in Saudi Arabia, Indonesia and even Britain, but not in Hong Kong.
"I went to Hang Seng Bank and the Bank of China, and they agreed to give me a loan. But it is not  according to Islamic law," Hussain said.
Mufti Muhammad Arshad, Hong Kong's chief imam and authority on Islamic law, advised Hussain that  Islam prohibited Muslims from borrowing money with interest.
In Islam, riba, translated as usury or interest, is a sin. Some Muslim scholars argue that the term refers to usury - which is an excessively high rate of interest - and not regular interest, but Mufti Arshad believes the terms are synonymous.
Hussain is among an emerging class of Muslims who have the means to look for stable housing, but the lack of Islamic financial services keeps them subject to rent increases and lease renewals. Mufti Arshad numbers cases like Hussain's "in the hundreds." Without other options, some local Muslims are left breaking the rules, in what the mufti calls a sin tantamount to eating pork.
The Hussain family arrived in Hong Kong 33 years ago from Pakistan. Since then, they have worked in retail at Chungking Mansions.  Between his Islamic book stall and a mobile phone business, Hussain makes around HK$50,000 a month and hopes to buy a home in Tuen Mun for about HK$1.3 million.
Rent increases keep his family - a wife and two children aged two and seven - on the move. "We are living in Hong Kong. Our kids are living here too," he said. "What we are thinking about is our kids."

Ideally, an Islamic bank would purchase Hussain's dream home from an original owner and, holding the title to the property, sell it to Hussain over several years. Interest would be paid in the form of fees  instead of interest, and the bank still makes a profit.
"Currently in Hong Kong, the Muslim population may not be enough to sustain Islamic banking solely for retail," said Damian Yip, divisional director of the Hong Kong branch of the Chartered Institute of Management Accountants.
HSBC's only Islamic banking facility in Hong Kong is the Hang Seng Islamic China index fund, created for retail investors in the city.
"Hong Kong may never be a core capital of Islamic finance due to the make-up of its population," said Razi Fakih, deputy chief executive of HSBC's Islamic banking facility, HSBC Amanah. The speciality branch offers services in seven countries, but according to Fakih there isn't enough demand to introduce it to Hong Kong.
In 2007, Chief Executive Donald Tsang Yam-kuen announced plans to turn Hong Kong into a hub of  Islamic investment, but little progress has been made to catapult Hong Kong into an industry that Moody's Investors Service expects will exceed US$1 trillion this year.
Bringing an Islamic bond market to Hong Kong demands a whole new set of banking institutions compliant with Islamic law on issues like interest and one that doesn't invest in industries prohibited by the faith, such as pornography and liquor.
In co-operation with Chinese University, Kuwait-Asia University is to open a business school university in the Arab emirates later this year to train new Islamic finance specialists.
Yip also said Islamic investment in Hong Kong may pick up at the end of the year. The Legislative Council is expected to introduce a bill relaxing double stamp duties on international investment. Measures like this helped promote Islamic investment in Britain and Singapore. In the meantime, Mufti Arshad says local Muslims still need Islamic banking. "Hong Kong banks don't realise how big the Muslim community here is," he said.
The 2008 Hong Kong Yearbook estimated 220,000 Muslims live in Hong Kong - a figure that includes some 150,000 Indonesian migrant workers.
Hameed Jalal, chairman of the  Incorporated Trustees of the Islamic Community Fund of Hong Kong, agreed that a need was not being met. Muslims in the housing market avoid mortgages altogether by choosing lower-cost properties or pooling resources from relations and paying for homes in cash.
Hussain's cousin Michael Ansari is also looking to buy a home in Hong Kong without violating his religious beliefs. He said the alternatives presented by Jalal were not even an option for him. "No one in our community is that wealthy," Ansari said.