Islamic finance: Hub or hubris?
Shariah banking is becoming big business in Southeast Asia, with Kuala Lumpur and Jakarta battling for the title of regional Islamic finance centre. But even the most optimistic bankers fear further expansion could be stymied by arcane regulation and lack of cross-border consensus. Eric Ellis reports.
Malaysian bankers hope Kuala Lumpur will become Islamic finance’s answer to Wall Street
HERE ARE SOME concepts that Islamic bankers in Southeast Asia like to throw around in their daily traverse between Mammon and mosque, and which might raise the collective eyebrows of the Western-dominated world of conventional banking – and provide pause for thought too as Islamic financing gains critical mass across Asia and beyond. If Lehman Brothers was an Islamic bank, it would not have collapsed, because "making money from money" is haram, forbidden under Islam, so its sub-prime derivatives drama would not have happened. Ipso facto, there would not have been a global financial crisis, nor the resultant pain pace RBS, Citi, the bank bonus drama et al. Secondly, the US Federal Reserve is, in effect, now managing policy along Shariah principles because its reducing of interest rates to such a degree, in order to kick-start economic growth, is a Shariah-esque act.
If that’s not enough, these Asian upstarts point out that not one Islamic institution in Indonesia or Malaysia has crashed, been bailed out or required massive surgery, either during the 1990s’ Asian financial crisis or in the past two years.