Islamic Banking to the Rescue

If the Dubai financial crisis is not as acute as it seemed at first, thank Islamic banking (in part).

If the Dubai financial crisis is not as acute as it seemed at first, thank Islamic banking (in part). Much of Dubai’s debt is in  the form of Islamic bonds, which tend to have extra payment flexibility (often with equity conversion provisos) than other contracts. According to the journal Banker, Islamic banking has $820 billion in assets worldwide. You see, in Islam, usury is haram. So, Islamic banks offer ‘interest-free’ halal deals in which money is not lent, but assets are bought on behalf of those short of cash, and then sold in instalments to them at a profit.  Such innovations make a flourishing banking system, rife with bai al inha or sell-and-buy-back agreements and other risk-sharing deals that look like equity finance. Countries like France, however, fear that such deals could result in creeping Sharia adoption by those who use it, thus curbing religious freedoms.

About The Author

Ninad D. Sheth