How Sharia Courts actually lead to lack of industrial development

this was a fascinating paper. I never figured that this could be a reason behind the Arabic world falling behind in industrial development...there you go, one more reason to consider having secular commercial courts. 

I quote

The courts of 17th and 18th century Istanbul were Sharia courts grounded in Islamic law and tradition, not unlike the courts that are gaining sway in today's Middle East. At the start of the project, Kuran and co-author Jared Rubin of Chapman University knew the courts were heavily biased in favor of men, titled elites and Muslims. By contrast, they strictly punished women, commoners and religious minorities such as Christians and Jews.
Yet as he reviewed the records, Kuran noticed that the very groups the courts favored -- Muslims, men and high-status individuals -- paid significantly higher interest rates for loans. Conversely, society's less fortunate -- women, commoners and religious minorities -- paid lower interest rates.
The reason? Because the courts went easy on Muslims, men and titled elites, lenders could not count on recouping their money and loaning to those groups became a high-risk proposition. Lenders responded by charging privileged individuals higher interest rates to cover their risk.
"The biases of the courts made it risky to lend to privileged groups," Kuran says. "The courts gave privileged groups incentives to break contracts. Judicially favored groups paid more for credit precisely because their promises were relatively less credible."
Men in particular paid significantly higher interest rates than women -- as much as 26 percent more, the study states. Women represented a better credit risk precisely because courts held them accountable, Kuran says. Also, women of the time were not free to travel alone, much less flee their creditors. Men, by contrast, represented a flight risk.
The findings help shed light on the contemporary Middle East, Kuran says. For one, they help explain why the once-prosperous region fell behind Europe economically, a lag from which the region is still recovering, he says.
As the Industrial Revolution took off in the 18th and 19th centuries and factories began springing up across Britain and Europe, access to capital became increasingly important, Kuran says.
Across Britain and Europe, industrialization was financed by wealthy investors who could secure large loans. Istanbul was a thriving commercial center at the time. The high interest rates faced by the city's elites help explain why a similar industrial expansion was slower to take root there.
"To succeed in mass production, one needed much more capital than in the past," Kuran says. "So it became a handicap to face very high borrowing costs."

Rule of law was helped by social stratification?

This post puzzled me. I quote:

Francis Fukuyama in his recent book "The Origins of Political Order" makes a similar claim about the origination of the rule of law, and so says that India has actually long had it because Brahmins held the state accountable to a set of laws that the king did not create.  However, he finds that India never developed a strong state (like the Chinese did, who on the other hand, never had the social stratification necessary to create the rule of law).

Bears thinking about, caste or social stratification as it is now known created the rule of law? Hmmmm, social law perhaps but that never stopped the damn rulers to do what they wished. I am really not sure that the Brahmins had that power to overrule or manage the rulers. Nothing that I have read says so. The Dharmashastras are full of this stuff but rarely does a ruler actually behave like what it says. And how does that square with the Mughal Empire and its Sharia law?

Five things you need to know about: The global Muslim market

This was a fascinating article. I am a bit interested in Islamic Finance. It provides a fascinating alternative to the currently held normal rules of investing and financial behaviour. Although I have my serious doubts about the “practises” of pricing Islamic instruments, the concept is quite interesting. A Muslim Private Equity sector so to say. So from that perspective, I agree with what the author says:

1. The size of the prize.

The global Muslim community, the ‘Ummah’ is huge – nearly 1.8 billion people around the world. The majority of those people are in Asia, particularly South and East Asia. It’s also a very young demographic – 52 per cent are under 24 years old. Author Vali Nasr has described this as ‘the third one billion market’ after China and India. However it has been widely neglected and has massive economic potential.

There are actually very few products that you can pitch to this entire population. So that has to be very clear. I cant say anything about Islamic Shampoo’s but what I can talk about are financial products. So the products that one can think about in this area are travel insurance, pilgrimage loans of a sort, basic mortgages, project financing, letters of credit, etc.

2. Don’t believe stereotypes.

Modern Muslims are going through a major period of re-assessment of their relationships with religious structures, cultural assumptions, authority, consumption and technology. This can be quite confusing for observers. A move towards conservatism in dress, for example, does not imply a rejection of hi-tech lifestyle items. They are often highly technically literate but at the same time do not see accepting Western technology as a reason to accept ideas they see as wrong.

This is nothing new, from time immemorial, Muslims have constantly reassessed their relationship with religious structures and frameworks. This is one of the reasons why so many sects of Islam have come forth. Also, I am not sure what this western technology is. Is Japanese technology western technology? How about the tech developed by India? This is a bit of a weird statement. And ironically, the chap warns against stereotypes and then proposes 5 rules/statements for the global muslims.

3. Tokenism doesn’t work.

Stamping products as Halal or Shariah-compliant is not enough. In fact our research shows that despite all the investment in Shariah banking, finance is seen as the least trusted category. Muslim consumers are highly interested in the authenticity and provenance of brands and the companies behind them. Their trust is therefore difficult to win, but once achieved is likely to be deeper.

This is indeed problematical. We dont have that many people who are cognisant of all the intricacies of finance versus Sharia. Then you end up in the problem of different sects. So there is over-reliance on a very few number of people who judge the authenticity and provenance of brands. Does that work to endanger trust? Sometimes.

4. It’s an open market.

You don’t have to be Muslim to be Shariah. Only 10 per cent of Muslim consumers cite manufactured for Muslims only as an important attribute when selecting brands. Ethics and business practice are perceived as more important.

Fair point

5. Engage strongly, but carefully.

The Muslim community is very open to marketers who seek their custom, so long as they feel it is done sincerely and honestly. However they are also fiercely protective of their religion and its culture, and very unforgiving to marketers who make mistakes or are seen to be hypocritical in their standards. There are many cases of bad errors in packaging, promotion and business practice.

Well, this is a matter for faith. When somebody asks me about Islamic Finance, I tell them to think about organic food. Its the same thing, for want of a different flavour, people are willing to pay more in a premium. But if the food turns out to be inorganic, trust is diminished and the stuff wouldnt sell.

Grand Hyatt Hotels are no longer fit to live in :(

I have recently moved jobs. Unfortunately, for this job, I will be travelling like an absolute idiot all over the world. Very interesting and tough job with loads of travelling (a travel blog perhaps?).

Few of my old cards, I have junked or thrown away an equal amount...

Sad, very sad.

 

 

 

 

 

Last time I was in such a travelling job, I collected so many hotel and airline cards that it was ridiculous, a clutch of gold, platinum, silver, blue, green cards were good, but then I realised, all that showed was that I was away from my kids and missed important days of them growing up. 

But in this job, have to travel again but I know which hotel chain to avoid now. The Hyatt hotel chain is pretty good, I have to admit, good rooms, good customer service, good frequent user programme and so on and so forth. But hey, no drinks, no stay. After a long day at work, you need a drink.

Oh! well, there are other hotels in Cairo but the image of fun loving enjoyable Cairo is slowly but steadily going down the tubes. Mind you, this is a perfect example of hypocritical thinking, stop drinking alcohol but I can find 1000's of other cases in a hotel which violate some interpretations of Sharia law, ranging from its financing to bathrooms to employment tribunals to banking, inheritance, and and and. But amusing, none the less.

And guess what? this will again blow up into a huge issue...

Technorati Tags: Cairo,Egypt,Saudi Arabia,Sharia,Islam,Muslims

Does Shariah mean the rule of law?

An interesting article from Noah Feldman but which curiously misses out many points which I would have thought he should have touched upon.

• Individual rights primacy over group rights
• rights of minorities
• rights of women
• ability to change
• same punishment for same crime is not necessarily the same (specially if
  you are of a different minority)
• Why would a liberal democratic originated jury based codified system
  should give way to a medieval system with all the problems given above?

All the problems Noah mentions are not problems with the current system. I am living in the here and now, and if I steal 5 p, then i would not get my hand cut off, but in some other places, that can happen. The problem is NOW, not 200 years ago, but then this article was a bit
confused in the thinking.

And the sad thing is, the silly archbishop which he mentiones, has had ancestors spend years, decades and centuries spreading a liberal legal system across the world where justice is blind and every body is treated equal, classical liberalism and overturned centuries of strange and bizarre imposition of laws. You notice how Noah Feldman doesn't talk about how Ibn Batuta had problems in every country he went to because he was trying to apply a harsh set of laws on
countries where there they did not apply.

So no, not impressed by the article at all, very confused, limited thinking and did a very poor job of explaining what Sharia was, is and applicability.

All this to be taken with a grain of piquant salt!!!

Sharia law can be appalling, says archbishop

After this archbishop says that he wants consideration to be given to Sharia as law in the UK for certain segments of British Society, he now says that it can be appalling. Don’t you realise that if Sharia comes in, nobody is going ask the Archbishop on what is good or appalling? They will all be jammed in, all the good, bad and ugly pieces.

Worse, no English courts can over-rule them, and if they try to do so, riots will break out. Go see what happened in India when they tried to give divorced Muslim women some modern rights. Never let the genie out of the bottle.

All this to be taken with a grain of piquant salt!!!

'Sharia is nothing but a human concoction of medieval religious opinion'

Hear hear! (thanks to Tarek for this note!). It was typical that the only people who welcomed that moron Archbishop's words were the extreme right of Muslim thought. That is what you are asking for, you blithering idiot?

Read and concur!

Technorati Tags: Sharia,United Kingdom

Why Sharia Law is all wrong for the UK?

Here's a very well argued post.

Technorati Tags: Islam,United Kingdom,Legal System

They let any idiot become an archbishop these days!

Words fail me. Here, go read for yourself. I am looking forward to him agreeing to have pastafarian and jedi law in England.

Idiot!

All this to be taken with a grain of piquant salt!!!

One Shia jurist's view of Islamic Finance

A fascinating exposition on how Muhammad Baqir al-Sadr, an Iraqi Shia Islamic Jurist who was incidentally killed by Saddam Hussein in 1980. Be that as it may, this article is worthwhile reading for people who are interested in how Sadr saw the world in terms of Shia theology.

Also check the footnotes, very very useful references for those who want to delve deeper into this rather unexplored view of Islamic Finance (as it is heavily biased towards the Sunni and that too a twin polar world, one the Arab world and second is the Malaysian World). And believe you me, there is a difference between the Shia and Sunni thought as this paper shows.

For example, Sadr indicates that Islamic economics is intended to serve three objectives: to ensure multiple ownership forms of property, to put in place limited economic freedom for commercial actors, and to achieve social justice in commercial affairs. This kind of formulation is very very different from the Sunni thought where the first two objectives are not formulated as such. The third is, for example, the deep theological and religious thought given to the proper and fair functioning of physical markets.

Mind you, this limitation of economic behaviour, such as what we recognise as regulation in the western world, is quite curious and interesting and ties directly into what we would see as the presence of theocrats who guide the great ship of the state.

An interesting aside is about wages. Should a worker receive a wage or a share of profit? Classically speaking, a worker should receive a share of profit rather than a wage as a wage is being fixed and putting a price on labour. So it is a type of interest after all as the wage is not variable. So Sadr goes through some rather torturous theological explanations to get by this problem.

But that is not a problem because in Shia Islam, you have the deputy of the Hidden Imam, the great company of Ayatollah's, who can decipher and decode and denote and devolve and take care of interpreting this complicated matter. Mind you, with the current cries for standardisation and formation of IF Councils and standard's bodies, has anybody noticed that the structure of Islamic Finance is slowly starting to resemble what we see in Iran? As in having Theologians sitting on standards and expert bodies to judge on the suitability of instruments, actions etc. Quite a curious thing and something that not very many people have identified. The fact that this is seriously against Sunni theology (nobody to intercede between a man and Allah) is besides the point.

The author unfortunately damns the current Sunni practice rather badly, and I quote: Given the substantial difficulty of maintaining a financial institution that neither took interest on commercial loans nor engaged in the types of commercial uncertainty banned by the doctrine of gharar, Islamic financial institutions have fallen back upon stratagem and artifice in order to function

The author points to countries like Malaysia where you have both conventional and Islamic finance systems running where evaluation can take place, but unfortunately, as I pointed out earlier, it has rather failed miserably. I have a quibble over the author's proposal for a universal Islamic bank, because he does not explain how exactly the risk transfer would happen. But still, the epistemological framework of Sadr is quite interesting indeed and could well be a model for others to follow, if they can get over the theological hump, that is.

All this to be taken with a grain of piquant salt!!!

Technorati Tags: Islamic Finance,Shia,Iran,Iraq,Islam

Another Beslan in the making?

See? I told you that terrorists are cannibals, they devour their own. Remember Beslan? They kill their own, they eat their own. They are like animals.

See this story. I quote:

PESHAWAR: Islamic militants armed with rocket launchers took around 250 children hostage at a school in northwest Pakistan on Monday following a shoot-out with police, officials said.

And this

Militants in northwest Pakistan have increasingly resorted to kidnappings and hostage-takings to press their demands for Islamic Sharia law and an end to military operations in the region.

Tell me where in sharia it is written that you can take children hostage? you blithering idiots? you are enjoined to not even harm a tree, forget about a human life. You subhuman imbeciles.

All this to be taken with a grain of piquant salt!!!

You dont have to be Muslim to be an Islamic Finance Scholar

This is the key, people tend to think that only Muslims can become Islamic Banking Scholars. That is not the case, and anybody can become an Islamic Banking or Finance Scholar. Here are more details.

Islamic Finance is on the growth path, there is a big paucity of Islamic Scholars and the current way of training them is way too complicated. You see, if you start putting together a strong bachelor degree or a professional degree (like CFA or a CA degree), there is no reason why students cannot do this degree and become a scholar. And with the CIMA degree, one can get this certification and start advising funds after some more training.

And this is going to be a growth industry, oil is not going to get cheaper and faith is going to get stronger. So the Muslim wealth funds and the Islamic investors are just going to grow and grow. They need support and since existing Muslim educational institutions are unable to supply the scholars, outside firms will step in.

If you think that people would not invest in funds that have been checked by say a Christian scholar of Sharia, they just need to have a front man who is Muslim, just like they have in Saudi Arabia and elsewhere. So the chap is happy, he just rubber stamps the decisions, and the financial institution wins, the investor is happy, the industry is happy. Everybody is happy as larry! :)


All this to be taken with a grain of piquant salt!!!

Sudanese demand the death penalty for teddy bear teacher

So the Sudanese now want the death penalty on the teacher. I quote:

According to some agencies, some of the protesters chanted: "Shame, shame on the UK", "No tolerance - execution" and "Kill her, kill her by firing squad".
One demonstrator told reporters that it was unacceptable to take a toy and call it Muhammad.
"We can't accept it from anybody. Even if they can do that in Europe, they cannot do it here in Sudan. We ask our rulers and judges to review what they have said. Fifteen days is not enough."

So who is right? If you look at the reactions, most of the Muslims here in the UK think that the Sudanese dont know Islam or Sharia. Are we saying that we cannot interfere in freedom of religion? on what basis are we going to interfere? Do you say that this is based upon the Universal Principles of Human Rights? But that seems to violate the religious rights of the Sudanese, no?

I know, i am being a devil's advocate here, but well, I have yet to hear anybody say that the Sudanese are wrong, they do not know their Islam and Sharia, and "this" is right. Funny, no? And the reason why I am being pushy is because I am seeing the same problem with Islamic Finance. Now let me drop the huge clanger.

Standardisation of Islamic Sharia Financial Principles will happen very soon (I am reviewing the FSA document and will post my review soon). Now if that does happen, then because Islam is a total philosophy, rest of civil and personal law will be dragged into it and standardisation of Islam will take place.

You laugh at me? Just you wait, Professor Higgins.


All this to be taken with a grain of piquant salt!!!

Justice, Saudi Style

Check out this blogpost on how the Saudi Judges are reacting on the Saudi Qatif Raped Girl case which is roiling the world. This is Sharia, I presume? And I presume they would know what it is since its the birthplace of Islam, the custodian of the holy mosques sits there and they are propagating exactly this Sharia and its knowledge across the world.

We know quite a lot of Saudi funded mosques are in various countries of the world. We also know that many countries are demanding Sharia to be used for personal law. Now, I wonder if this means that this kind of Saudi Justice could be seen in places ranging from UK to India to Canad? I dont know, but who knows? How will this square with the European Court of Justice?

All this to be taken with a grain of piquant salt!!!

Problem with Scholars inhibiting Islamic Finance

To judge whether or not a financial instrument is halal according to Islamic theology is a very complex issue. While the basics of the "halality" is clear, no interest and investments according to profit participation, when faced with having to apply Islamic Jurisprudence and theology to some of the very complex project financing or fixed income structures, stronger men than me have quivered.

So it is not surprising that people are complaining that there are only about 50 to a 100 odd bunch of scholars who seem to be the sole population in the world capable of judging whether an investment or instrument is Sharia compliant. This is pushing up the price of these scholars into the millions of dollars per transaction.

More importantly, there seems to be a question of inconsistency. What one scholar says, another may negate. And who is to judge whether Scholar A is right or Scholar B is right? Certainly not me, but if there is even a slightest doubt on the instrument, it will be almost impossible to sell, syndicate or list. And you cant establish national regulatory structures which vary by scholar or what side of the bed he woke up!. So this is going to be a bit of an issue going forward. Here's a story on it.

Technorati Tags: Sharia , Islam , Islamic Finance

UK Treasury paves way for Islamic bonds

Another good step by the British Government to push ahead and try to launch consultations to allow the British Treasury to issue sukuk's. I have been asking for this to be pushed ahead even faster but still, I suppose legislative congestion is to be expected. I quote:

 

The government will step up preparations this week for the launch of sharia-compliant bonds, known as sukuk, as it seeks to turn London into the world centre of Islamic finance.

Kitty Ussher, the Treasury minister, will tell City leaders she is launching a three-month consultation process and could use next spring’s Budget to put in place any legal changes that might be needed to launch the first western government sukuk.

Ms Ussher believes that the scheme will entrench London as “a global gateway to Islamic finance” and help Britain’s Muslims, who sometimes struggle to find sharia-compliant retail products such as mortgages.

The bonds could be used as vehicles to allow Muslims in Britain to invest in National Savings products through banks and post offices.

Islamic bonds are structured to pay profits or rent from an underlying asset or business, rather than interest, which is outlawed under sharia religious law.

Unlike conventional bonds, sukuk are akin to Islamic “investment certificates” representing ownership in the underlying asset. Returns are paid to investors in line with their proportional ownership.

The sukuk market has grown dramatically in the past five years. Nearly $40bn (£19.1bn) of these bonds have been issued this year, from virtually nothing in 2001.

On Wednesday, Ms Ussher will tell a high-level group of City executives – assembled by the Treasury to develop London’s financial services sector – that there is no question of her going cold on the project.

There had been speculation that the government was backing away from the scheme after the departure of its architect, Ed Balls, the former City minister, from the Treasury in June.

One member of the Treasury’s committee of experts on Islamic finance, which is advising the government on structuring and pricing the bonds, said: “The project did lose momentum after Ed Balls left, and it’s still in the early stages. It’s not a done deal.

“Doubts have been expressed over whether it would attract investors and the complexities of the legislation needed.”

However, Ms Ussher told the FT: “There is no question of delay at all. If anything, there is greater demand. We have been doing an enormous amount of work.”

Despite this, details remain to be solved, including the structure of the sukuk. Ms Ussher’s consultation paper refers to “risks relating to price and demand”.

British sharia-compliant bonds could act as a catalyst for big UK and western companies to launch similar securities in London, boosting the capital as a centre for Islamic finance.

The competition for business is fierce, however, with the Middle East increasingly seen as an attractive location to set up operations because of its oil wealth.

London’s share of Islamic funds, which invest in only sharia-compliant products, has dropped by almost a third in the past five years as more of them move to the Middle East, where they see big potential for business.

Technorati Tags: Islamic Finance , Financial Markets , London , United Kingdom