Sharia Banking: An expose……….by Muhammad Saleem
Excerpt from “Chasing a Mirage: The Tragic Illusion of an Islamic State
Family law is not the only place where the introduction of sharia law is being sought in Canada. While Islamists may have suffered a setback in their attempt to introduce sharia law in this country, they have not accepted defeat. In fact, their plan is to introduce “sharia” in any form, wherever it would gain acceptance as a legitimate part of the Western lexicon.
The recent attempt to obtain government validation and funding of sharia-based private Islamic schools in the
province of Ontario almost sneaked in, but for a public outcry. Sharia-compliant music, sharia-sanctioned soccer, sharia-based health practice (in which physicians refuse to treat patients of the opposite gender)—you name it and the Islamists are trying to push some aspect of sharia into our lives. However, the one area where their efforts are making the most ground is in sharia banking, where they have the help of some extremely powerful allies.
On one hand Islamists have made common cause with such figures of the left as London Mayor Ken Livingstone and maverick British MP George Galloway, denouncing capitalism as the source of all ill. However, a closer examination suggests Islamists are also lining up with such icons of global capitalism as Citibank NA, HSBC Holdings PLC, and Barclays PLC, which have all endorsed sharia banking and started offering Islamic financing products to a vulnerable Muslim population.
While sharia-style family law was essentially promoted by imams and the mosque establishment, sharia-based banking is being promoted by well-heeled Muslim bankers and investment lawyers, who are driven not by teachings of the Prophet but the lure of profits.
The Globe and Mail reported in May 2007: “Several Canadian financial institutions are preparing sharia-compliant mortgages, insurance, taxi licensing and investment funds to help serve the country’s fastest-growing part of the population.” Promoting it of course is a prominent Muslim corporate lawyer with close ties to Canada’s Conservative Party, Walied Soliman. A lawyer at Ogilvy Renault LLP, Soliman told The Globe, “I expect it [sharia banking] to grow exponentially in Canada in the next couple of years.”
He confessed that the promotion of sharia banking has become a priority practice area for his firm.
This push from Muslim banking executives working inside the corporate world has had some success. Most big Canadian institutions are treading carefully, and not all are jumping on board. The Globe reported that while the Royal Bank of Canada quietly tested a sharia finance product a few years ago and didn’t find enough market interest, other Canadian banks, smelling easy pickings, are lining up to wear the Islamic mantle. Scotiabank and Toronto- Dominion Bank have been quietly considering whether to start offering sharia-compliant products as part of the big banks’ strategy to reach out to a growing “immigrant population.” I doubt very much if Hindu, Sikh, and Chinese “immigrant” Canadians are excited at the prospect of halal banks.
The promoters of sharia banking are Islamists, and their target is to control the Muslim population and segregate them from the rest of the world, one bank account at a time. With every mortgage signed, the
family has to take ownership of sharia and disown the rest of society as the impure moneylenders.
While Scotiabank and TD officials were rubbing shoulders with two hundred delegates at a Toronto Islamic Finance World conference in Toronto in summer 2007, Canada’s Office of the Superintendent of Financial Institutions (OSFI), which regulates financial institutions, said their staff was being pushed to brush up on the fine points of sharia law to cope with the anticipated expansion of Islamic financial services in Canada.
Normand Bergevin, managing director at OSFI’s approvals and precedents division, told The Globe that several people on his staff were learning about business plans, legal structures, accounting methods, types of governance and other issues related to Islamic finance. He told the newspaper: “It’s fairly new to us.
There’s not a whole lot of experience here in terms of supervising or even understanding the different types of products. They all have little twists on them that make them very unlike anything we’ve ever seen before.”
Guess who is going to fill the knowledge gap and find jobs in high places of Canada’s financial watchdog?
While Canada’s banks salivate at this supposed untapped niche market, one Muslim-owned financial institution with strong marketing and social links to most Islamist events in Canada has been doing a brisk business.
Omar Kalair, the chief executive officer of UM Financial, has said demand for his group’s sharia-compliant products has been so great that UM has stopped all marketing and has a five-thousand-person waiting list of people who want to switch over from conventional mortgages to ones that are sharia-compliant. Kalair however admitted that from among the 200,000 Muslim households in Canada, his target is the capture of 2.5 percent of this market, and that too with the help of one of the big five banks.
Origins of Sharia Banking
Islamic banking traces its roots to the 1920s, but did not start until the late 1970s, and owes much of its foundation to the Islamist doctrine of two people: Abul Ala Maudoodi of the Jamaat-e-Islami in Pakistan and Hassan al-Banna of the Muslim Brotherhood in Egypt. While these two pillars of the Pan-Islamist movement propagated jihad and war against the West, they also recognized the role international financial institutions could play in carrying out their political objectives.
Since 1928, when it was created, the Muslim Brotherhood has placed a high emphasis on the creation of a so-called Islamic economic system. Banna and his successor Syed Qutb even laid down principles of Islamic finance. Millard Burr and Robert Collins in their bookAlms for Jihad claim that the Muslim Brotherhood watched, waited, and learned the management of money that was essential to finance a worldwide organization devoted to spreading their Islamist ideology.
But the theory was only put into practice once the US-backed Pakistani military dictator General Zia-ul-Haq overthrew the government of Z.A. Bhutto and established sharia law in Pakistan, forcing the country’s public-sector banks to run their operations based on Islamic principles and without the role of interest.
The proponents of Sharia banking rest their case on many verses of the Holy Quran, which in their interpretation outlaw any business or personal financial transaction involving interest. There is no
unanimity among the Muslims who, in voting with their feet and chequebooks, have overwhelmingly rejected banks that operate in a supposedly interest-free environment. Most Muslims can see through the fog of deception, but we are a billion strong worldwide, and even if a small minority falls prey to the Islamist
propaganda, there is lots of money to be made.
Quranic verses that address the question of the role and the question
of loans and debts include:
• Al Baqarah (2:275): “God hath permitted trade and forbidden usury.
Those who after receiving direction from their Lord, desist, shall be
pardoned for the past; their case is for God [to judge]; but those who
repeat [the offence] are companions of the Fire: They will abide
• Al Baqarah (2:276): “Allah does not bless usury, and He causes
charitable deeds to prosper, and Allah does not love any ungrateful
• Al Baqarah (2:278): “O you who believe! Be careful of (your duty to)
Allah and relinquish what remains [due] from usury, if you are
• Al Baqarah (2:280): “If the debtor is in a difficulty, grant him
time Till it is easy for him to repay. But if ye remit it by way of
charity, that is best for you if ye only knew.”
• Al Nisa (4:161): “And their taking usury though indeed they were
forbidden it and their devouring the property of people falsely, and
We have prepared for the unbelievers from among them a painful
• Ar Rum (30–39): “And whatever you lay out as usury, so that it may
increase in the property of men, it shall not increase with Allah; and
whatever you give in charity, desiring Allahs pleasure—it is these
[persons] that shall get manifold.”
From these Quranic verses it is abundantly clear that the Quran is addressing the rich money lenders to show compassion towards the borrower and give him or her more time to pay back the loan. In fact the Quran suggests to the lender that it would be far better if the money lender forgave the loan altogether.
To suggest that the onus of complying with sharia rests on the weaker borrower is obscene and against the spirit of equity in Islam. I say this because what the imams and self-styled scholars of sharia banking are proposing makes it easy for the wealthy to be pious simply by not having to do anything, while the poor who need to borrow are told to stay away from banks that lend.
Once more we see an example of Islam attempting to bring justice to the poor while Islamists make it difficult for the poor to access funds they don’t have. Today, owners of Islamic banks are billionaires—the practitioners of sharia banking are among the richest men in the world,* while the vast majority of Muslims still struggle to eke out a living beyond one dollar a day. Sharia banking fattens the bottom lines of the imams, the bank owners, and the lawyers who pull out their best to Islamicize anything that sustains their handsome hourly rate.
Every translation of the Quran into the English language has rendered the Arabic word riba as “usury,” not “interest,” yet Islamists have deliberately portrayed bank interest, the cost of borrowing money, as usury. For Islamists, there should be a cost to renting a car and renting a DVD, but when renting money for a period of time, there should be no cost of this capital. Instead, Islamists have created exotic products with names that are foreign to much of the world’s Muslim population
This is where interest can be masked under the niqaab of Mudraba, Musharaka, Murabaha, and Ijara.†
Whereas interest is the charge for the privilege of borrowing money, typically expressed as an annual percentage rate, usury is the practice of lending money and charging the borrower interest, especially at an exorbitant or illegally high rate.
Two senior Muslim banking experts-turned-authors have written scathing critiques of sharia banking: Muhammad Saleem has labelled the practice as nothing more than deception, while Timur Kuran has suggested that the entire exercise was “a convenient pretext for advancing broad Islamic objectives and for lining the pockets of religious officials.”
Why Canadian banks would contribute to this masquerade is a question for ordinary Canadians to ask.
Muhammad Saleem is former president and CEO of Park Avenue Bank in New York. Before that he was a senior banker with Bankers Trust, where among other responsibilities he headed the Middle East division and
served as adviser to a prominent Islamic bank based in Bahrain.
In his book Islamic Banking: A $300 Billion Deception, Saleem not only dismisses the founding premise of Sharia and Islamic Banking, but says: “Islamic banks do not practise what they preach: they all charge interest, but disguised in Islamic garb. Thus they engage in deceptive and dishonest banking practices.”
“Proponents of Islamic banking say that Islam bans all interest. But an understanding of pre-Islamic and Islamic history and keeping in mind the context would lead one to conclude that what the Quran bans is usury, not interest. Usury can be defined as interest above the legal or socially acceptable rate. Phrased differently, usury is the exploitative, exorbitant interest rate.”
Islam’s essence is its quest for equality and social justice. Muhammad Saleem says that any banking or economic system that purports to be “Islamic”—including the current crop of Islamic banks—should answer
two questions: By supposedly staying away from interest and sharing risks with their clients, were they able to help make the economic system more just, fair and equitable, and honest?
While Saleem goes to great lengths in exposing the intellectual dishonesty surrounding the marketing of sharia-compliant banking, Professor Timur Kuran, who taught Islamic Thought at the University of Southern California, mocks the very idea.
In his brilliant book Islam and Mammon: The Economic Predicaments of Islamism, Kuran writes:“There is no distinctly Islamic way to build a ship, or defend a territory, or cure an epidemic, or forecast the weather.” He says the effort to introduce sharia banking “has promoted the spread of anti-modern currents of thought all across the Islamic world. It has also fostered an environment conducive to Islamist militancy.”
Secondly, were these banks able to promote economic development in the Muslim world? In the words of Saleem: “Sadly, the answer is a resounding no. There is absolutely no evidence that the Islamic banks have made any contribution in either of these two areas.”
The fact is that China and India, two countries that have had some measure of success in alleviating poverty and enhancing development, have outpaced all the Muslim countries put together despite their enormous natural resources and strategic locations. Sharia banking may not have alleviated poverty or generated economic development, but it has been a boon to the mullah class on one hand and, on the other, to the yuppie Muslim bankers and investment lawyers who have created a niche for themselves at the expense of the larger Muslim masses.
Saleem, who saw the functioning of Islamic banking from the inside, writes:
“In promoting the establishment of Islamic banking, the Sharia scholars have played a critical role. Lacking any knowledge of banking, economics and for many even Islamic history, in interpreting riba, they have confused interest with usury. . . . Secondly, as Sharia advisers to Islamic banks, they have blessed many transactions as Islamic—meaning non-interest bearing—when in fact they are clearly charging interest, but interest payments are masked.”
Dozens of Islamic scholars and imams now serve on sharia boards of the banking industry. If Canada’s TD Bank, BMO, and RBC join the league, it will be interesting to see how the ultra-left Trotskyite allies of the Islamists view their partners hobnobbing with the bankers atop Toronto’s TD Tower.
Moreover, a new industry of Islamic banking conferences and forums has emerged, permitting hundreds of sharia scholars to mix and mingle with bankers and economists at financial centres around the globe. In the
words of Saleem, who attended many such meetings, they gather “to hear each other praise each other for all the innovations they are making.”
The Toronto conference promoting sharia banking and Islamic investments was part of this worldwide touring circuit that allows banks to keep the sharia scholars pampered and well looked after. There are at least five international conferences every year and these have been going on annually for the past twenty-five years. Saleem estimates that the cost of each conference exceeds $2 million and so far more than $200 million has been spent just keeping the sharia banking circuit alive.
He cites one example of how sharia scholars only care for the money they get from banks, and are willing to rubber-stamp any deal where interest is masked. Saleem describes one such incident as “comical”:
“I have first hand seen comical cases where the sharia scholar of an Islamic bank only spoke Arabic, but a lending officer only spoke English and Urdu. A particular financing transaction was structured in English with such terms as x% over LIBOR.** So we had an interpreter who would translate from English to Arabic, explaining this convoluted transaction to the Sharia advisor. It was at times painful and other times comical to watch the proposal being presented to this religious scholar for his blessings to ensure that it was consistent with the principles of sharia. The “sharia scholar,” elderly and partly deaf, had little experience in modern banking and finance. However, mindful of the fact that the bank was paying him a generous retainer, he gave his blessing to the deal, after being fully made aware that the bank wanted to do this deal, even though from the look on his face it was obvious that he could not tell the difference between a trade deal and a leveraged buyout transaction.
In the name of Islam, what amounts to deception and dishonesty are being practised while ordinary Muslims are being made to feel that their interaction with mainstream banks is un-Islamic and sinful. As the Muslim banker asked: “Through various devices—mostly cosmetic—[Islamic] banks end up with virtually no risk. If Islamic banks label their hamburger, a Mecca Burger, as long as it still has the same ingredients as a McDonald’s burger, is it really any different in substance?”
Muhammad Saleem laments the fact that few people are exposing the deception of this exercise in the name of Islam. “We should be able to point out the failures and shortcomings of Islamic banking and economics without being accused of being anti-Islamic,” he says. Perhaps Scotiabank, the RBC, BMO, and the Office of the Superintendent of Financial Institutions will pay heed to this former banker’s words of caution.
The sharia-banking charade is a sad indictment of the Muslim community. Islamic banking is not some resurrection from a golden period—it is a 20th- century creation that flies in the face of reason, logic, and the spirit of Islam, yet is being thrust on us for no fault of ours.
* “The reason [why they are so wealthy] was a two-page report on the
wealth of 15 ruling dynasties, seven of which are Arab,” Refaat
Jaafar, managing editor of Dubai- based Forbes Arabia, told Reuters.
In October 2007, Forbes Magazine reported on the wealth of 15 ruling
dynasties, seven of which are Muslim. Saudi Arabia banned the issue
after it ranked Saudi King Abdullah third, behind the rulers of Brunei
and the United Arab Emirates.
† Arabic names given to various banking products.
** LIBOR is the London Interbank Offered Rate, much like the US Federal
Bank rate or the Bank of Canada rate.