Lorne Cutler : There is Nothing Inherently Wrong With Shariah Finance
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Transcript of Lorne Cutler : There is Nothing Inherently Wrong With Shariah Finance
8/14/2019 Lorne Cutler : There is Nothing Inherently Wrong With Shariah Finance
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financing, the bank is repaid from the profits generated by the venture.
The second key principle of Islamic banking deals with the types of goodsthat can't be financed. Alcohol, pornography, gambling and agriculture/food processing industries based on pork are prohibited.
Thirdly, an Islamic bank is not allowed to engage in speculative practicessuch as derivatives.
While Muslims are required to donate a certain amount to charity or zakat,this is no different than Jewish tzedakah (charity) to the poor or Christiantithing. Muslim companies and banks should also give to charity. We callthis corporate social responsibility.
Each Islamic bank has a panel of three Islamic scholars who opine on
whether something is shariah-compliant. These panels can only determinewhat constitutes shariah-compliant financing, not whether the structurecomplies with the laws of the country, and they have no authority to actagainst the country's law.
There are international agreements prohibiting banks from moneylaundering and funding terrorist groups. If required, existing internationalagreements can be modified to ensure Islamic banks are governed bythese agreements if they aren't already. If certain banks don't abide bythese rules, Western banks will be prohibited from working with them.
Canada's criminal code also makes it an offense to support terroristgroups. If a religious scholar advising a particular Islamic bank alsopreaches jihad, regulations could be established to prevent our banksfrom dealing with that bank. Islamic banks would be subject to the sameregulations and supervision as are conventional banks.
Interest is a merely a tool, not a fundamental Canadian or Western value.If certain groups have problems charging interest, there is nothinginherently wrong in setting up financial institutions that can providefunding in a way that does not abrogate religious principles. Our existing
and future banking laws and regulations can protect us against the risk of a bank engaging in illegal activities.
National [email protected] Cutler is an Ottawa-based independent financial consultant.
Islamic finance links:
www.gifc.blogspot.com
www.globalpro.com.my