Shariah bankers: West ready for faith-based alternative

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Shariah finance likely will grow in coming years, with Saudi Arabia and the United Arab Emirates being followed by Indonesia, Turkey, Singapore and some Western countries as viable locations for expansion.

The IFSL recently published a detailed report on the sector highlighting how “the U.K. is getting ahead of the game, in Europe at least, in facilitating this sector” — as noted by Emile Abu-Shakra, media relations manager at British bank Lloyds TSB.

Lloyds stole a march on the competition by greasing the wheels for Shariah-compliant bank-to-bank transactions, and now Britain has a bigger Shariah finance sector than Egypt or Pakistan.

In total, 22 financial institutions offer Shariah-compliant services in Britain, compared with nine in the United States. However the American financial sector is eager to source and provide new products — among them Shariah finance.

American International Group Inc.’s December pledge to bring Islamic home insurance to the United States was met with a written rebuke by Rep. Sue Myrick, North Carolina Republican, and Rep. Frank R. Wolf, Virginia Republican, who warned that opaque charitable transfers made by Shariah finance advisers could end up funding terrorists.

Mr. Holton said some Islamic financial institutions have been implicated directly in bankrolling terrorists. “From 1988 to 2001, when it was designated a terrorist entity by the United States and the United Nations, Bank al Taqwa [registered in the Bahamas] transferred tens of millions of dollars to Hamas, al Qaeda, the Taliban, and others,” he said.

An elite cadre of scholars dominates the advisory boards of Shariah institutions, and these same thinkers are often called by Western institutions who want to develop Shariah-compliant products. However some, such as Sheik Yusuf al-Qaradawi, are banned from entry into Britain and the United States for making statements supporting Islamist terrorism, while another, Mufti Taqi Usmani, who has advised the Wall Street Islamic index, has promoted extension of full Shariah law into Western countries.

Most troubling, perhaps, is the appearance of Bank Melli of Iran at the top of a listing of the world’s top 500 Islamic financial institutions, published by the Banker in November 2008 and reproduced in the IFSC report. Bank Melli is under U.S. and EU sanctions for facilitating Tehran’s support of Hamas and Hezbollah and funding Iran’s uranium enrichment program. In total, Iran has six of the 10 biggest Shariah-compliant institutions and double the Shariah assets of any other country.

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