An Indian Civilizational Perspective

Self Deception of Islamic Banking!

You know one thing that is worst about religion generally (ANY religion) is that it promotes self-deception. It trains adults to be like grown up kids-fearing-goblins! There is no reason why you should keep deceiving yourself, but you still do. So, to cure your own self-deception you create some more self-deceptions that you feel are the way out. It is not as if the subsequent self-deception cures your earlier one… but WTF, one starts believing everything is fine and dandy from here on!!

Why am I saying this? Well, in Islam, in Quran there is this thing against "Riba", definition of which has been unclear ever since it was put in… how it can be interpreted now is an even greater mystery. Well why is it bad? Because the Jews did it. OK, so is charging Riba (or euphemism for interest) by Jews only bad, or it any interest bad? And why just interest? What about dividends? Is Interest’s crime only that one earns money on money? Well, then what about the dividends on the equity of a bank?

So, what does the financial industry does to get by it? They create this thing called Islamic Banking! What do they do? Well here is an indication:

Hussein Hassan of Deutsche Bank is an example of the sort of expert required. He structures specialized Islamic bonds, or sukuk. For a bond to qualify as sharia-compliant, there must be an underlying asset backing it. One cannot simply issue bonds to raise money, the way it’s been done elsewhere for centuries, in return for a promise of a fixed rate of return. To be Islamic in nature, the securities that look like bonds must represent fractions of an equity asset, rather than fractions of a loan.

According to sharia scholars signing off on the prospectuses, the practices of the multinationals are fully Islamic. That is good news for corporations that want to raise money from Muslims, and for the observant clients themselves.

So, all you apparently need is a fraction of the loan backed by an asset, for the interest on a loan (ok, they say it is on the Asset, but we know what you buy to earn the interest!) to become halal! And the mullah is happy to sign it off! So, who interpreted riba as interest? The Mullah. Who said that interest is un-Islamic? The Mullah. So, who signs off on this instrument that covers this naked interest with a burka made of fishnet? The Mullah! And so, one self-deception is cured by another self-deception! QED.

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