Faith
and finance could not be any more dichotomous today, yet the UK is the leading
western country and Europe’s premier centre for Islamic finance with US$19 BLN
of reported assets.
London
lawyers have evolved skills and experience to become well versed in shariah
compliant contract law as well as financial instruments in order to service the
growing appetite for shariah compliant investments from Middle Eastern
investors who believe the UK to be a judicious and profitable place for
investment; our accountancy and banking sectors have similarly adapted to this
growing and profitable emerging market. Couple this with the need for foreign
investment into the UK’s major national infrastructure projects for the next 20
years we can be certain that because of our national economic interests, the UK
offers a profitable and most importantly a potentially
halal enterprise for our market
evolving a service provision for the religiously conscious wealthy foreign
investor.
However,
ironically, Islamic finance has yet to take off amongst the UK’s 2.7 million
Muslims and this is largely due to the fact that UK consumers approach Islamic
finance as a debtor whereas foreign consumers tend to be creditors or investors.
This has a significant impact on how you relate to the current modus operandi
and structure of Islamic finance. For instance as a creditor, be you a stock
and shares investor or a current account holder, you can be confident that your
money is invested in a shariah complaint manner which is similar to conventional
ethical funds that screen investments to ensure your monies are not invested in
what are known as vice investments e.g.
funds that invest alcohol, tobacco, munitions, gambling etc related stock. Furthermore, for investors in
shariah compliant funds, there are added considerations to ensure where interest cannot be ignored that
interest is siphoned off and donated to charitable causes. Another interesting
criterion for shariah compliant funds is that they will not include companies
which generally carry more than 30% debt.
So
to summarise the three key principles for shariah compliance are 1. There
should be no interest or riba which
means an increase on the capital 2.
Not investing in vice funds and 3. Not investing in companies that are in significant debt. However, all these
principles are secondary to the
fundamentals of ideal human conduct which should be based on equity and mercy.
Our
global political system has become incredibly connected through the membership
of a whole host of international organisations be it the World Trade
Organisation or the becoming of federal
alliances like the EU and also cooperative alliances between a select group of
countries such as the G7. Naturally, the world utilises the banking systems of
nation states which when enters into the arena of international trade they are also
governed by what is known as the Basel Accords which proffer guidance to
regulate the global banking industry.
The
implication of a well-connected economic system tends to create fluidity in
markets meaning fewer barriers in the movement of people, products and services
in order to encourage economic prosperity meaning more jobs, innovation and entrepreneurship.
However, for the sake of ‘economic prosperity’ we seek to encourage the
deregulation of markets, create and loan money that literally does
not exist and then are legally allowed pursue the debtor. As we have deregulated
markets we have unwittingly ‘deregulated ethics’ allowing companies to freely
promote a culture not based on moral values but one based on maximising our
consumption, at the lowest possible cost, at the highest margins with total
disregard for the net societal interest.
As
we have mastered the exploitation of our own markets our businesses encroach on
politically weak and less technologically sophisticated cultures and
communities, where the goal is rarely philanthropic but rather to open markets
for the purpose of profit regardless of the consequence on the host society.
Therefore,
in an age of profit and a failure of theology of sorts, Islam has begun to offer a strong alternative to the
conventional approach to profit and investment. Having proven its resilience
before and after the global crisis in 2008, as evidenced by the IMF, the future
for shariah inspired principles for the growing socially conscious investor and
the risk mitigating fund manager who opt to invest in shariah compliant funds
will offer a powerful economic challenge to riskier vice enterprises that
although may be profitable on the balance sheet remain incredibly costly to our
societies.
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