Islamic banking

Great interest in no-interest Islamic banking

It is hard to imagine a business speaker who happened to be a Christian holding a Bible at a lecture, but Brian Kettell can often be seen brandishing a small, tan-coloured copy of the Koran. That is because he lectures on Islamic banking, and while the West is becoming an increasingly secular society, the majority only paying lip service (if that) to religion, in the Muslim world even business revolves around the word of Allah, as revealed to the prophet Muhammad by the angel Gabriel.
Islam’s legal system, known as sharia law, was in the spotlight in early 2008 when the Archbishop of Canterbury appeared to back the introduction of aspects of it in the UK.
The very title of Kettell’s book, Islamic Sukuk, prompts a question: what does sukuk mean? Sukuk are Islamic bonds ’which behave in practice like any conventional bond’. The reader is in no doubt from the start that this is an area we can’t just stray into without some serious study.
Islamic banking is now the fastest-growing segment in world finance and, understandably, everyone wants to know how it works and how they can get involved.
Kettell’s experience in this field began when he worked for the Bahrain Monetary Agency (now the Central Bank of Bahrain) and the Central Banks of Iran and Syria.
He outlines his theme with a dry wit that can only come from someone who knows his subject inside out.
The main difference from what we think of as ’conventional’ banking is that the concept of interest is not permitted. Conventional bonds are not entertained under Islamic law. Thus a company lending money (and they are just as keen to get a good return as are their Western counterparts) will take an agreed percentage of any profit – but that is assuming there is a profit. The lender shares the risk as well as the potential benefits. While we are all frantically trying to avoid risk, Islam says you have to have some.
Under sharia law, you can’t make money out of money: there has to be an asset involved in a transaction. Therefore an investor cannot simply hand over some cash. For instance, if it is a construction project, he or she will buy the cranes, JCBs and other equipment that enable the developer to do the work.
A Westerner becoming involved in Islamic banking has a lot to learn about both the concepts and the terminology.
In Islamic business, there can be no derivatives; there is no hedging.
A Muslim will not invest in any venture that involves alcohol, gambling, pornography or even pork.
According to Brian Kettell, the most highly paid individuals in the Muslim world are sharia scholars, who make decisions on legal matters according to their knowledge of the Koran.

For more information or to order a copy of Islamic Sukuk, visit www.islamicbankingcourses.com