Shariah bankers: West ready for faith-based alternative

SINGAPORE | Backers of Shariah-compliant finance see an opportunity for expansion amid the global economic downturn, and some Western banks are welcoming this growing source of new business.

"Islamic bankers should do some missionary work in the Western world to promote the concept of Shariah banking, for which many in the West are more than ready now," Indonesian President Susilo Bambang Yudhoyono said at the World Islamic Economic Forum last month in Jakarta.

Such statements have given rise to fears that Shariah finance is a stalking horse for hidden political or religious aims. Shariah finance is an extension of Islamic law, pushing a faith-based alternative to Western banking.

Key Islamists who advise Shariah financial houses have called for full Shariah law to be adopted in Western countries and, in some cases, have made statements supporting terrorist groups.

Shariah finance means institutions and norms that fit with Islamic law. Fully compliant Islamic financial institutions are prohibited from interest payments and require transactions to be backed by tangible assets.

Speculation and hedge funds are off limits — ditto for anything connected to porn, gambling, alcohol or pork. Shariah finance targets Muslims who want to avoid what are deemed "un-Islamic" Western banks or financial practices, and appeals to clients' faith as well as their bottom line.

The practice has its detractors.

"A shift from present global economic practices [in which many Muslims participate] to Shariah-based practice" would mean "an unacceptable intrusion into Western culture," said Stephen Schwartz, executive director of the Center for Islamic Pluralism.

Mr. Schwartz said the sector is arguably un-Islamic by contradicting the traditional Islamic teaching that "Muslims living in non-Muslim societies must accept the laws and customs of the countries to which they immigrate."

Depending on the measurements used, the Shariah finance sector manages assets of $700 billion to $800 billion, according to the Islamic Financial Services Board, an industry body. Standard and Poor's estimates that the sector could reach $4 trillion before long.

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