Bank Scandals Fuel Interest in Islamic Finance

Bank Scandals Fuel Interest in Islamic Finance

Recent bank scandals have fueled interest in Islamic banking¹ because it forbids interest or fees on loans.

Questions about ethics² in global finance could benefit the Islamic banking sector³, experts say.

Supporters claim that Islamic finance is more ethical⁴ than traditional finance. Islamic finance follows Sharia law and does not allow interest or fees for loans of money. Banks and businesses must be cleared to make sure they comply with Sharia law.

Raja Mohamad is secretary of the Gulf⁵ Asia Sharia Compliant⁶ Investment Association. 

“We have a very sweet spot, when conventional banking at the moment is suffering from scandals,” he said. He spoke⁷ at a conference on Islamic finance in Singapore.

“We’re not selling Islam here. We’re selling accountability -- transparent⁸, real economic activity,” he said.

Another factor driving Islamic finance globally is the rise of the Association of Southeast Asian Nations. ASEAN is a trading group of 10 nations in Southeast Asia with 635 million people.

Forty percent of these people are Muslim, said Awang Adek Hussin, Malaysian Ambassador to the U.S. He spoke at a conference in Washington, DC. Malaysia is chair of ASEAN this year. 

ASEAN is the seventh largest economy in the world, generating $2.53 trillion in 2014, said Ambassador Hussin. By 2050, the OECD predicts it will be the fourth largest economy in the world.

The OECD is the Organization for Economic Co-operation and Development. It helps governments deal with economic and social issues in a global economy.   

“Demand and growth for Islamic finance in ASEAN countries can only be on the increase,” said Ambassador Hussin. This year, ASEAN is integrating the economies of its member countries to spur trade and investment. That will also help spread Islamic finance, he added.

Islamic finance has its critics. Clement⁹ Henry is visiting research professor at National University of Singapore. He said Islamic finance has “unfortunate connotations” that might be associated with “political Islam, possibly terrorism.”

Henry said his research, however, has found that people working in Islamic finance are not driven by politics.

The biggest challenge for Islamic finance is the ban on investors¹⁰ collecting interest on loans. So Islamic banks have devised alternative structures. This could include financing a business or one of its projects, and then sharing the profit or loss.

Such techniques could improve financial ethics, say experts. Businesses must open their books so Islamic banks can verify their performance. This provides transparency. Businesses cannot downplay profits and give banks a smaller cut.

In addition, Islamic finance is viewed as being more realistic about making money. Sharia financing is tied to real economic activity. Other financing is based on abstract financial models.

Suhaimi Zainul-Abidin is founding member of the Gulf Asia Sharia Compliant Investments Association. He spoke at the conference in Singapore.

"You can't make money without economic activity, something that you're going to do that creates that justification¹¹ for profit," he said.  

“That’s a really good safeguard for [the] financial industry because you’re not creating money out of thin air, right?,” he said. “There’s always going to be a real link, and that really, really helps.”

Ghiyath Nakshbendi is an international business professor at American University in Washington, DC. Islamic finance provides equal treatment for men and women under Sharia law, he said. 

For example, when a man and a woman get married, Sharia law allows her to own property. Sharia law says she can make her own income and keep her salary, he said. 

But observers warn that Islamic finance is headed in a dangerous direction. Bankers are coming up with increasingly complex financial products.

“Really, most of these products are looking to mirror conventional finance,” said Habib Ullah, a partner for banking and finance in the Middle East at the law firm Taylor Wessing.

Islamic banks may go too far in copying conventional finance, warn experts. They may take the same risks and be Islamic in name only.     

Words in This Story

scandals – n. an occurrence in which people are shocked and upset because of behavior that is morally or legally wrong

ethics – n. rules of behavior based on ideas about what is morally good and bad

accountability- n.  required to be responsible for something

transparent – adj. honest and open : not secretive

integrating – v. to make (something) a part of another larger thing 

spur – v.  to cause (something) to happen or to happen more quickly

connotations – n. an idea or quality that a word makes you think about in addition to its meaning

1 banking   

n.银行业，银行学，金融业

参考例句：

• John is launching his son on a career in banking.约翰打算让儿子在银行界谋一个新职位。
• He possesses an extensive knowledge of banking.他具有广博的银行业务知识。

2 ethics   

n.伦理学；伦理观，道德标准

参考例句：

• The ethics of his profession don't permit him to do that.他的职业道德不允许他那样做。
• Personal ethics and professional ethics sometimes conflict.个人道德和职业道德有时会相互抵触。

3 sector   

n.部门，部分；防御地段，防区；扇形

参考例句：

• The export sector will aid the economic recovery. 出口产业将促进经济复苏。
• The enemy have attacked the British sector.敌人已进攻英国防区。

4 ethical   

adj.伦理的，道德的，合乎道德的

参考例句：

• It is necessary to get the youth to have a high ethical concept.必须使青年具有高度的道德观念。
• It was a debate which aroused fervent ethical arguments.那是一场引发强烈的伦理道德争论的辩论。

5 gulf   

n.海湾；深渊，鸿沟；分歧，隔阂

参考例句：

• The gulf between the two leaders cannot be bridged.两位领导人之间的鸿沟难以跨越。
• There is a gulf between the two cities.这两座城市间有个海湾。

6 compliant   

adj.服从的，顺从的

参考例句：

• I don't respect people who are too compliant.我看不起那种唯命是从，唯唯诺诺的人。
• For years I had tried to be a compliant and dutiful wife.几年来，我努力做一名顺从和尽职尽职的妻子。

7 spoke   

n.（车轮的）辐条；轮辐；破坏某人的计划；阻挠某人的行动 v.讲，谈（speak的过去式）；说；演说；从某种观点来说

参考例句：

• They sourced the spoke nuts from our company.他们的轮辐螺帽是从我们公司获得的。
• The spokes of a wheel are the bars that connect the outer ring to the centre.辐条是轮子上连接外圈与中心的条棒。

8 transparent   

adj.明显的，无疑的；透明的

参考例句：

• The water is so transparent that we can see the fishes swimming.水清澈透明，可以看到鱼儿游来游去。
• The window glass is transparent.窗玻璃是透明的。

9 clement   

adj.仁慈的；温和的

参考例句：

• A clement judge reduced his sentence.一位仁慈的法官为他减了刑。
• The planet's history contains many less stable and clement eras than the holocene.地球的历史包含着许多不如全新世稳定与温和的地质时期。

10 investors   

n.投资者，出资者( investor的名词复数 )

参考例句：

• a con man who bilked investors out of millions of dollars 诈取投资者几百万元的骗子
• a cash bonanza for investors 投资者的赚钱机会

11 justification   

n.正当的理由；辩解的理由

参考例句：

• There's no justification for dividing the company into smaller units. 没有理由把公司划分成小单位。
• In the young there is a justification for this feeling. 在年轻人中有这种感觉是有理由的。