Cafe of Broken Dreams by John scientific terrorist in action

There Is No Special Islamic Finance Finally Confirmed

New Dubai crisis increases tensions among each emirates and not so popular Dubai is again cursed in the Arab world. From economical view will be interesting to observe the unite gulf central bank project which has been in recent years finishing. However the crisis reveals another thing, that is the story behind glorified Sharia-compliant financial products.

Picture from Times Online

A year ago I’ve published an article saying that Islamic mortgage is nothing special, but just a common copied western concept of mortgage with different names which use interest; the biggest economical sin in Islam. Finally I am not the only one who noticed the same thing. NY Times today says:

a British banker from Barclays who had moved to the region to create an entire Shariah-compliance team. He shared tips about various ways to create “structured products” that would pass muster with Muslim investors. (To me, the investments looked like bonds, walked like bonds and talked like bonds — but he never called them that.) Some of the bonds that Dubai World is in jeopardy of defaulting on, by the way, are Shariah-compliant sukuk. Just don’t call them bonds.

Yes there is exactly the same situation with mortgage you can call it a profit sharing, a rent, a reselling principle, but for Allah’s sake not an interest! In fact there basically cannot be a mortgage without interest. The article goes on:

The Shariah Committee of the Accounting and Auditing Organization for Islamic Institutions, which is based in Bahrain, ended up changing the rules to make them stricter because of widespread abuse.

It raises a question what is the function of the committee when it’s were not able to realize obvious for such a long period of time? In the end famous British economist Willem Buiter says:

these were window-dressing pseudo-Islamic financial instruments that were mathematically equivalent to conventional debt and mortgage contracts

Yes I agree, it is nothing I haven’t already known a year ago.