Understanding Islamic Finance: Confessions of a Financial Revert (PART 1)

By Ibn Ibrahim As-sugrah – Sponsored by Lotus Capital Limited

When I first learnt of Islamic finance I didn’t quite know what to make of it. It seemed like Muslims were just crazy about being different and wanted to have an Islamic everything. Don’t get me wrong, it’s fine to be different once in a while, but for once can’t we just get along with everybody else? Is there really anything wrong with simple finance? I mean it’s not pork, is it? And no one is asking you to eat the money? Or don’t imams spend money? Bottom line, I didn’t get it and frankly, with all that’s going on these days, I wasn’t sure I wanted another Islamic twist to something as simple as finance.

Here’s the thing, just like you, I couldn’t shake off the curiosity so I turned to the only person I knew I could trust for the unadulterated truth, Google. Don’t laugh, Google has its good side; it’s simple to use and it has everybody’s views, from the conservative Nazi style Hitler surrogate to the bleeding heart African Nelson Mandela. Google has one downside though; there’s a little too much information and there’s always some spicy second line story when you search the word “Islam” from a computer with an American IP address. Anyways, I did my intensive googling, with as much focus and skill as a Reuters journalist. I’ve got to tell you, after a marathon on Google I didn’t quite come away with the same level of cynicism.

First of all, I figured out that Islamic finance is simply general finance. The only twist I saw was that Islamic finance excluded some parts of finance that I didn’t like anyways. Most of the excluded things, to be honest, I barely understood and have always been slightly suspicious about. I’ll give you an example, have you ever wondered why insurance companies are major strict with premiums yet give you a hard time  paying out claims? The whole paper money thing allows some countries get fat by punching numbers while others are hungry and confused. We know it! We all know it! So when I finally got over myself to understand the concept of Islamic finance, I knew that a bunch of guys in Egypt or somewhere had decided to finally make a stand against the unfair banking system (because that’s kind of like what these guys do).

So here’s what I figured out. Islamic finance is not Islamic because it builds mosques. It’s Islamic because it pursues transparency and avoids social ills. What I’ve come to realize is that Islamic finance is actually the real finance, or at least the way finance should be. What we call conventional finance today is actually anti-society, unfair, opaque, speculative and disruptive. And no, I’m not saying that all conventional finance is bad, what I’m saying is Islamic finance is just like general finance, but without the bad stuff.

I eventually got off my Google ride and did some real primary digging. I think I’ve learnt a lot more and if you stick around, I’ll be here next week to share it. For the remaining cynics that are reading this, please come with a pen next week.

Salamu Alaikum

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