Rating agencies (and Shari`a advising) need to be regulated by governments
In an interesting development, the U.S. government will now get more involved in regulating the business of rating bonds:
The Senate approved a provision that would thrust the government into the process of determining who rates complex bond deals, in a move to end alleged conflicts of interest blamed by some for worsening the financial crisis.
Likewise, I have often argued that Shari`a advising (rating of Islamicity, albeit on a 0 or 1 scale) should be regulated by government and staffed by salaried employees. This is not an ad hominem attack on any Shari`a advisors, as many like to suggest. It is merely good business practice.
posted by Mahmoud El-Gamal at 6:30 AM
14 Comments:
http://arabnews.com/economy/islamicfinance/article54441.ece
Subject: Check this out, Arizona is also doing Sukuk
http://www.nytimes.com/2010/05/05/realestate/commercial/05states.html
Most Islamic Financial Institutions have many branches in different coutries and their Shairah board is only located in one country. So how would all other countries control the decisions of "offshore" boards.
Besides, how can American Senate have the power and knowledge to contest decisions from specialists from the field.
Financialislam.com
It means that Shariah boards are no different from economic interest driven rating agencies.
What about then the morality and faith aspect of the shariah scholars? If you look at the history of Islam, all scholars were independent and had no relation with state which would ensure their fairness. I think that there should be distinction from this aspect and its not quite right to draw parallels between the Wall Street folks and shariah scholars at least from morality perspective.
http://www.khaleejtimes.com/Displayarticle08.asp?section=biztalk&xfile=/data/biztalk/2010/June/biztalk_June2.xml
Harvard is now producing shariah finance scholars!
You should suggest a panel of independent shariah scholars to vet these arrangements for the US government. And suggestions for legal changes that would facilitate shariah compliant financing. Keith Ellison and Andre Carson both on the financial committee would be good point men for this initiative.
Check this clause out. The “lender” has a choice to have any combination of fixed interest and appreciation according to New York law. You can then have a fixed interest rate of zero theoretically.
New York mortgage law:
Appreciation/Interest
The authorized lender, at its option, can receive no more than 20 percent of any future
appreciation of the property securing the reverse mortgage loan as full or partial
consideration for the making of the loan. The lender’s entitlement to the appreciation
commences with the first of the following events:
• The end of the loan term; or
• Ten years after the reverse mortgage loan commences.
An authorized lender may charge a fixed rate of interest on the outstanding amount of
monies advanced under the reverse mortgage agreement or any combination of fixed
interest and appreciation.
http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=369397&version=1&template_id=48&parent_id=28
Islamic banks are attracting deposits in Syria big time!
http://www.northjersey.com/news/business/97366519_Reaching_out_to_Muslims.html
New Jersey credit union is offering islamic finance now!
http://rogueeconomist.blogspot.com/2009/04/islamic-banking-in-brunei.html
I have a new theory in Islamic finance.
I purchased a house for $216111.11. I put 20% as a down payment. So the balance is $172888.89. I have a 15 year mortgage with a rate of 4.75%. The property would rent for $1700.00 in the market. The mortgage payment is $1344.78. Out of which $660.43 goes to my equity in the first month. And $684.35 goes towards interest. With taxes and insurance the monthly payment is $1700.00. So taxes and insurance expense is $356.00 Since I have only a 20% stake in the property. If this was a true equity partnership. The partner should pay 80% of the taxes and insurance which equals $284.8. I should pay $71.20. I should then pay $1075.2 to my partner. Which is 80% of $1700.00 minus $284.8 for taxes. Currently the partner is only getting $684.35. That is a difference of $414.77. Which means that this $390.65 is sort of riba/usury in my favor. So to be purely Islamic I need. I should donate this $390.65 to charity on behalf of my partner to cleanse my income.
A true Shariah-based solution for home ownership is finally within reach! You can own a home without debt, without riba, and without a mortgage. The Home Partnership Program conforms 100% to the letter and spirit of Islamic law without compromise. To learn how the program works please watch the video:
www.halalinc.com
Dr. Nasr Abu Zayd has passed away!
Nice to read this piece.
Keep writing more about it. It is really gracefully and very well written skill.
Thanks for sharing.
Florida Residential Mortgages
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