After emerging largely unscathed from the financial crisis that hammered North American and European financial institutions, Islamic banking has momentum.
Worth $1 trillion in assets, Islamic banking is being lauded by British Prime Minister David Cameron and supported by Canada’s Conservative government, major banks and credit unions, leading business schools and influential Muslims across the country.
Islamic banking — which bans interest payments, pure monetary speculation and investing in such things as alcohol, gambling, pornographic media and pork — is being sold as the next big thing in financing for Canada, which is home to just over a million Muslims.
“Awareness in Canada of Islamic banking has increased dramatically in the last few years,” says Walid Hejazi, an associate professor at the University of Toronto’s Rotman School of Management, where he teaches on the subject.
“With the federal government’s efforts in this respect, Canada’s attractiveness to Islamic finance will grow,” Hejazi says. He cited how Prime Minister Stephen Harper’s government helped sponsor a World Islamic Banking Conference last year in the oil-rich Persian Gulf.
Many Canadian Muslims are seeking “Shariah-compliant banking solutions to their personal finances,” says Hejazi, a Lebanese-Canadian. They want home mortgages that are not based on conventional Western interest payments, but which operate more like a partnership.
The International Monetary Fund, Hejazi says, recently attributed the expansion of Islamic finance to demand from the increasing number of Muslims living in the West, growing oil wealth in Muslim countries and people seeking “ethical” and lower-risk financial products.
Even though Islamic banking has some harsh critics among Canadian Muslims who consider it unwieldy — with many still suffering from the 2011 bankruptcy of Toronto-based UM Financial, which offered Shariah-compliant mortgages — the movement is gaining energy.
In addition to Canadian banks, such as CIBC, making explicit gestures to offer Islamic banking, Hejazi says the Canada Mortgage and Housing Corporation recently reported there are no regulatory hurdles to stop Shariah-compliant banking expanding in Canada.
To continue to grow, some of the world’s largest Islamic banks — most of which are in the Middle East, Indonesia and Pakistan — are looking at rebranding to appear less religious and more open to Western investors drawn to the kind of no-interest cooperative banking that is also offered in countries such as Sweden.
For instance, the Abu Dhabi Islamic Bank, the largest Shariah-compliant lender in the emirate, is considering removing the word “Islamic” from its name and calling itself Abu Dhabi International to emphasize its service quality. Many financial institutions in Muslim-majority countries already simply call themselves “participation banks.”
“I think many Muslims in Metro Vancouver are excited about the idea of Islamic banking. In general, I think it’s a good idea,” says Luay Kawasme, director of the Vancouver Muslim Community Centre.
“The appeal of it for Muslims is they don’t have to get involved in financing that involves interest. Instead, the risk occurs between the financial institution and the borrower. You basically go into business together as partners.”
The Islamic ban on usury grew out of the seventh-century era of Mohammed. The founder of Islam, Luay says, opposed the way “the wealthy would get outrageous returns on their loans; charging interest rates of 20, 30 and 40 per cent.”
Bans on usury are also embedded in Hebrew and Christian scriptures, Luay recognizes.
(The Vancouver Sun / 26 December 2014)
---Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com
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