Islamic Finance & Europe: a necessary dialogue

Transcription

1 Islamic Finance & Europe: a necessary dialogue By Reza Zain Jaufeerally, (LLB, BVC Middle Temple, LLMs) Researcher, Centre for Ethics & Economics, University of Leuven IFSB 4 th Islamic Financial Services Forum: The European Challenge 1 2 1

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3 Islam and trade

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6 Common definition of Islamic Banking Islamic banking refers to a system of banking/financial activity that is consistent with the principles of Islamic law (Shari ah). Shari ah prohibits the payment of fees for the renting of money (Riba, usury) for specific terms, as well as investing in businesses that provide goods or services considered contrary to its principles (Haraam, forbidden). While these principles were used as the basis for a flourishing economy in earlier times, it is only in the late 20th century that a number of Islamic banks were formed to apply these principles to private or semi-private commercial institutions within the Muslim community. From Wikipedia 11 There are 5 fundamental principles to Modern Islamic Banking. This consists of 3 interdictions and 2 positive obligations: 1. No riba (interest, usury) 2. No gharar or mayssir (uncertainty and speculation) 3. No haram (Sinful) sectors 4. Sharing of profit and losses 5. Asset-backed Financing Typically, a Shari ah Supervisory board validates whether a financial product and/or transaction is halal or not. 12 6

7 Shari ah has negative connotations: Archbishop of Canterbury Rowan Williams was the subject of a media and press furore in February 2008, following a lecture he gave to the Temple foundation at the Royal Courts of Justice on the subject of 'Islam and English Law'. (Caricature from The Guardian ) 13 How backwards is Shari ah? Is it opposed to the UN Global Compact? Human Rights Principle 1: The support and respect of the protection of international human rights; Principle 2: The refusal to participate or condone human rights abuses. Labour Principle 3: The support of freedom of association and the recognition of the right to collective bargaining; Principle 4: The abolition of compulsory labour; Principle 5: The abolition of child labour; Principle 6: The elimination of discrimination in employment and occupation. Environment Principle 7: The implementation of a precautionary and effective program to environmental issues; Principle 8: Initiatives that demonstrate environmental responsibility; Principle 9: The promotion of the diffusion of environmentally friendly technologies. Anti-Corruption Principle 10: The promotion and adoption of initiatives to counter all forms of corruption, including extortion and bribery. 14 7

8 Research conducted: Are the tenets of Islam consistent with the Ten Principles of responsible business outlined in the UN Global Compact? Conclusion : with the possible exception of Islam s focus on personal responsibility and the non-recognition of the corporation as a legal person, which could undermine the concept of corporate responsibility, there is no divergence between the tenets of the religion and the principles of the UN Global Compact. Indeed Islam often goes further and has the advantage of clearer codification of ethical standards as well as a set of explicit enforcement mechanisms. Focusing on this convergence of values could be useful in the development of a new understanding of CSR in a global context and help avert the threatened clash of civilizations. Islam and CSR: The compatibility between the tenets of Islam and the UN Global Compact by OWW Consulting, Research Report December 2006, available at 15 Support of the Vatican The ethical principles on which Islamic finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service. 4 th March 2009, in the Osservatore Romano, the Vatican s official newspaper 16 8

9 UK's Brown backs Islamic finance Already in June 2006, (then) Chancellor Gordon Brown pledged support for the growth of Islamic finance, saying the UK can act as "a gateway" for Islamic trade and finance. 13 June PM Brown wants to make the UK a centre for Islamic investment. He has called for stronger trading links between the UK and Muslim countries. 17 France «Nous sommes déterminés à faire de Paris une grande place d accueil de la finance islamique (We are determined to make Paris a great haven for Islamic Finance.)» Nov

10 Ummah? 19 A more accurate picture 20 10

11 21 Thank you for your attention and participation