Wednesday, April 26, 2006

To the new breed of Islamic finance jurists

At a conference last weekend, I might have gone overboard in criticizing Islamic financial practice as smoke and mirrors with no value added to Muslim customers. Mr. Nizam Yaqubi's response was to say that I may agree with Sheikh ul-Azhar that bank interest is not the forbidden riba, but that the majority of Muslims do not accept that opinion.

Of course, the various fatawa by the current Sheikh ul-Azhar Dr. Tantawi, Mufti Dr. Gum`a, previous Mufti Sh. Wasel, and others, were not categorically to permit all types of bank interest. Moreover, in my own writing, I have argued that much of the improperly collateralized lending by Egyptian banks, which put them in deep trouble with large nonperforming loans, was obviously ribawi from economic as well as juristic perspectives.

The point, though, is the following: Perhaps the new breed of Islamic finance jurists (Dr. El-Gari, an economist who was or still is an Associate Prof. of Economics at King Abdulaziz University; Mr. Yaqubi, an economics BA holder from McGill and private businessman, etc.) view much of conventional financial practice as perfectly fine, and view classical Islamic jurisprudence as an impediment to its utilization by pious Muslims. Their job, according to this view, would be simply to synthesize every possible conventional practice from ancient contracts, and to do it as efficiently as possible.

Of course, that is the perspective of the non-Muslim lawyers, and their view can be that they are in fact providing value to the customers of Islamic finance: at least the value is psychological if they were using financial products but feeling guilty about it, and the value may even be material if they had refrained from using the conventional products before they were synthesized "Islamically". I find it more difficult to recognize that Muslims can also hold the same view: "I'm providing some value, and if I make some money in the process, what can be wrong with that?". Mr. Yaqubi even said at a conference in KL -- chastising people like me who criticize them for taking so much money -- that the lawyers make a lot more money than they (the "scholars") do. Dr. El-Gari also chastized me once at a conference in Dubai that my arguments -- regarding the aforementioned Azhar fatawa, which date back a century -- were not appropriate for a conference on Islamic finance.

It would be much less lucrative for them, but wouldn't it be better for those modern-day economist-jurists to educate the public about the nature of Islamic jurisprudence of transactions instead of perpetuating the misguided pietist approach and profiting therefrom? Would they not have a clearer conscience doing that? Wouldn't it be more Islamic?


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