Why ChristianConcern was Right about Islamic Finance

Roughly a year ago, I came across a document titled "What's wrong with Islamic finance?" published by?ChristianConcern,?a?Christian Legal Centre based in London. I found the document interesting and shared it with my circle. I received some mixed responses.??

Some people accused me of spreading hate, while others mentioned how one of the main?problems?we are facing now is a lack of understanding or literacy of Islamic finance. They were suggesting that the criticism forwarded in the document is due to a lack of understanding on the part of the publishers and not the fault of Islamic finance itself.?

Although the document did contain some?critiques?that were?genuinely?based on a lack of?literacy?and understanding on the publisher’s part,?I?found it very amusing that the?more?inflammatory?criticisms pointed out in the document?on Islamic finance were all?more or less true?and valid?and?were?not a result of a lack of literacy and understanding.?In this belated piece, I will be going through the?inflammatory?critiques?forwarded in the document?and reason for their validity.?

The inflammatory criticisms in the document are the following:?

Criticism?#2:?The removal of interest in Islamic finance is deceptive?

Criticism #3:?Islamic finance is promoted by and associated with Islamic extremists?

Criticism?#4:?Islamic finance aims to create a separate, rival financial system?

Criticism #5:?Islamic finance lends credibility to sharia law which is illiberal, undemocratic and discriminatory?

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"The removal of interest in Islamic Finance is deceptive"?

This statement can be assessed through a few?perspectives: pricing, participation in the interest-based system?and;?the existence of interest in Islamic financial instruments.?

From a pricing perspective, we could look at the comparative pricing of Islamic finance alternatives with their so called "conventional" counterparts. It is the general case that in the same market, competing financial products are priced at par with each other (a product of the invisible hand). It could be argued that the claim is correct.?

Since Islamic finance is supposed to be interest free, shouldn't its products be cheaper (i.e.?the price less interest charges?). From a pricing perspective, this critique could suggest that the no interest claim of Islamic finance while charging the same as conventional finance is deceptive. Since this is not the case, this is a valid criticism.?

From the perspective of participation in the?interest-based?system, the criticism is also valid. Islamic finance claims to be interest free yet it?is operating?within a financial system that is inherently based on interest. There is no getting away from it.?

From the perspective of claiming that interest is present in Islamic financial instruments, this criticism could also be argued to be valid. In fact, one of the main concerns within the field of Islamic finance is the convergence of Islamic banking practices with its conventional counterparts.?

It is a well know phenomenon that Islamic financial instruments are primarily "interest-free" based on their contractual structure, while the outcomes?of the contracts?are?highly comparable to (if not?exactly the same?as) their conventional counterparts. Thus, from a fundamental perspective of Islamic financial products themselves (in general), the claim that the removal of interest in Islamic finance is deceptive is a valid criticism.?

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"Islamic finance is promoted by and associated with Islamic extremists"??

This criticism is a particularly interesting one because it concerns the subjective concept of extremism.?As what constitutes extremist ideals and beliefs are inherently subjective and tends to be a product of an ideology, it can be accepted that from a?Christian?perspective, Islamic finance is indeed associated with and promoted by Islamic extremists.?

Likewise, it could also be argued that from an Islamic perspective, "conventional" finance is promoted by and associated with secular extremists as it promotes interest and usury. Since this criticism is based on the subjective notion of what is and isn't extreme, it cannot be refuted. It is entirely based on perspective.?Thus,?from their perspective, it is valid?to?perceive Islamic finance as being promoted by and associated with Islamic extremists.?

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"Islamic finance aims to create a separate, rival financial system"?

This statement is entirely correct.?The reason why Islamic finance was developed was to give Muslim alternatives to?interest-based?finance.?This?in itself implies?and insinuates that it seeks to create a separate and rival system. It is entirely?correct. From?a Muslim perspective, it should not be regarded as a criticism. Rather, it should be seen as an acknowledgement of what the field of Islamic finance is striving towards.?

In fact, the main?drawback?of Islamic finance, as alluded to earlier, is its inability to exist in direct contrast and opposition to "conventional" finance. Rather, it is still operating on a fractional?reserve based?system and creating products with mirrored outcomes as their "conventional" counterparts.?

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"Islamic finance lends credibility to sharia?law?which is illiberal, undemocratic and discriminatory"?

This statement needs to be divided into two. First, there is the claim that Islamic finance lends credibility to the?Shariah. This?is true. Although,?it should be pointed out that the?shariah is true?in itself and?does not need any externality to lend it credibility.?

That being said, Islamic finance is built on the premise of shariah compliance. Islamic financial products are developed with a the shariah in mind and are assessed based on the shariah.?Thus,?the statement that Islamic finance lends credibility to shariah law can be understood as being true.?

The second part of the statement is that "shariah law is illiberal, undemocratic and discriminatory". Here, again, each claim needs to be assessed separately. "Shariah law is illiberal". First, we need to understand what liberalism?means. "liberalism,?in?general,?is?the belief that it is the aim of politics to preserve individual rights and to maximize freedom of choice." Concise Oxford Dictionary of Politics?

Liberalism can be understood as an ideology based to the liberty, freedom, and individuality. Liberal ideology tends to be based on the premise of freedom of choice and democracy. Since, as?will be discussed?below, shariah law is undemocratic, it?follows that it is?illiberal.?Therefore,?it is valid to claim that shariah law is?illiberal.?

"Shariah law is undemocratic". This critique is valid. Shariah law is not based on democracy. Thus, it is factually undemocratic. However, it can be argued that the role of shura' does lend the Islamic?decision-making?process an element of democracy.?Likewise, it could also be argued that the concept of ijma' is also an element of democracy in the shariah structure.?That being said, on?a fundamental level, it is valid to say that shariah law is undemocratic because it is not based on a democratic system.?

"Shariah law is discriminatory". Discrimination can be understood as different treatment being forwarded to different parties, especially in an unfair way. Based on this definition, it is valid to say that shariah law is discriminatory.?

There are many instances where,?based on the shariah, different parties are treated differently. The most notable case is the clear legal distinction made between Muslims and non-Muslims. Non-Muslims are not liable under shariah law while Muslims are. This, by definition, is?discriminatory. Thus, it is correct to call the shariah discriminatory.?

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The gist of it all?

The?reason why I felt compelled to write this piece was?because the responses to the document in my circle highlighted the prevailing attitude in the milieu of Islamic finance:?blaming a lack of literacy, shirking responsibility, and an inability to?recognise reality. I like to think of Islamic?finance?as having primarily two camps, the defenders and the nay?sayers. The defenders dismiss criticism?from nay?sayers?as a lack of literacy?and a want of understanding.?This is, of course, a gross simplification.?But, nevertheless, I feel that it rings true in most cases.?

The response to the?document has highlighted?the fact that?some?stakeholders of Islamic finance tend to perceive a factual pointing out of?valid statements as defamatory and as a form of attack towards the field. This is absurd.?The “criticism” discussed in this piece are all true and factual. Thus, it can be said that the problem is not with the criticism. Rather, the problem is with how the criticism is perceived.??

The main problem with those who found the criticism offensive was their need for validation from external parties. It could be argued that this is a product of apologeticism. The need for validation from those one inherently disagrees with is unproductive and?shows an inherent insecurity with the thing one is so?desperately?seeking validation for. It logically follows that?one who seeks validation for their beliefs is?likely?operating under the?premise?that only beliefs that are validated externally are worth?believing?in.?

It seems that some stakeholders of Islamic finance are?falling into the trap of on the one hand supporting a field that by definition is opposed to “conventional” finance while, on the other hand, seeking approval and validation from the proponents of the very field that Islamic finance actively tries?to oppose. Absurd.??

子曰：?“人不知而不愠,不亦君子乎?”?

“Is he not a man of complete virtue, who feels no discomposure though men may not understand him?”? - Confucius?

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Moreover, something is to be said about the current zeitgeist of feeling over thinking. The criticism highlighted in this piece were not wrong in themselves, but they made readers *feel* bad.?The?criticism made readers *feel* bad because it was published by those opposed to the ideals?of Islamic finance. The?hallmark?of a rational person is the ability to?fairmindedly assess the criticism and arguments of one’s intellectual opponents.?A statement is what it is, whatever it is, regardless of from whom it is.?