ABC Radio National Background Briefing’s detailed investigation into the institutions and contract structures for “Islamic” finance here in Australia should make sobering listening for Australian Muslims. It (at least superficially) bears an uncomfortable resemblance to the other Islamic marketing scheme, “Islamic education”.
Although the report is 50 minutes in length, it rewards the listener’s attention. It also highlights the economic phenomenon of “regulator capture”, whereby those regulatory authorities (in this case, Shariah Supervisory Boards) become captured by, or accommodate those that they regulate. Tarek al Diwani puts forward a compelling case for authentic Islamic finance and argues that sheikhs who audit contracts must not be paid by those companies whom they regulate.
The purpose of Sharia-compliant finance is to share risk between the borrower and lender. This report vividly highlights how this has now become a wordplay in some “Islamic” financial institutions. The Sharia contracts that are now used and touted appear to be typical mortgage contracts where the borrower takes the risk and the lender gets a fixed rate of return.
Many Muslims may ask, why do you highlight so publicly, such dirty laundry? The reason is of course, that it has been the lack of community scrutiny that has lead to this situation. Muslims should also be fully informed about the institutions with whom they enter into business relationships. We suggest that all Muslims must become personally conversent with the fundamentals of halal business arrangements. These can be learnt by attending courses such as those provided by Al Kauthar.
Umar’s (RA) warning that you could not know someone in truth until you went into business with them, once again demonstrates the timelessness of his wisdom.