By our lslamic Correspondent
 
 
 

The Saudis and Sheikh Thantawi Deny "Islamic Banking"  

On the Internet the Saudis have their own home page. The homepage begins with "Saudi Arabia The Land of Islam". Indeed if anyone has more right to claim the mantle of Bukhari and Abu Hurairah it is the Saudis. The Prophet is believed to have been born, bred and died there. But these descendants of the Prophet's community do not have Islamic banking in their country.

There are 11 major banks in Saudi Arabia. Banking kicked of f in the 1970's in Saudi Arabia after the first oil crisis in 1973. "Letters of Credit" were issued by banks to facilitate the import of Cadillac's for sheikhy sheiks. Then "credit cards" were made available to finance the huge consumer boom. Saudis wanted to buy Chevrolets using credit cards. These are all interest-related instruments. There is nothing exclusively "Islamic" about them.

In 1995 Saudi banks recorded slightly less but still impressive profits close to US986.0 million. The Saudi government issued bonds close to Saudi Riyals 5.0 billion to finance budget deficits. Source of repayment: future oil revenues. The deficits have increased ever since the American engineered Gulf War took place. The Saudis and the, Kuwaitis have paid for every cent that was spent by the Americans, the British and their main allies to "keep Saddam Hussein from invading Saudi Arabia". These are all interest bearing instruments. Nothing too "Islamic" about them.

The "loan to deposit ratio" of Saudi banks increased from 63% to over 66% from January to September 1995. The Saudi Riyal also firmed up against the US Dollar. The Saudi authorities are happy that (check this out) the interest rate differentials between the Saudi Riyal and the US Dollar "narrowed to between 10 to 20 basis points (0.1% to 0.2%)".

The Saudi banking system is largely a conventional banking system. The "Guardians of the Haramain" do not make much fuss about the so-called "Islamic banking". Why? Because there is no such thing.
 
Another luminary in the "Muslim" world who opposes "Islamic" banking is none other than the Sheikh (or President) of Al Azhar University in Cairo, Sheikh Thantawi. Al Azhar University in Cairo is the oldest university in the world. It is also the most pre-eminent. Institution of learning for "Islamic" studies in the world. In 1996 Sheikh Thantawi was appointed as the 46th Sheikhul Azhar of President of the university. The Sheikh is known to be a controversial man among the "lslamic" intelligentsia. Among his many rulings is that bank interest is not part of riba or "usury". Hence there is no need for any such thing as "Islamic" banking. This is an astute observation by the Sheikh.

His detractors find it difficult to argue with him because they cannot show any true "Islamic" alternative to conventional banking. (See related article "Abracadabra Banking"). The so-called "Islamic" banking also adds up the dollars and cents. "Islamic" bank or not, you still have to mortgage your house to take a loan. The only difference is that the Islamic bank does not call it a loan. They use some other weird Arabic name like "mudarabah", "bai bithamam ajil", "istisna" or whatever. But you still have to meet your monthly payments. If you do not pay, the bank will auction your house. What is so "Islamic" or "unislamic" about it?

Thantawi is indeed a giant among "Islamic" scholars. But how do the ulema handle Sheikh Tantawi? Their reaction has been typical. Instead of listening to his arguments carefully, they are instead embarrassed about his statements. To overcome their predicament they say that his is a "minority" view only, the majority of scholars believe that bank interest is 'riba'. To them the majority is always right. They call this the consensus or "ijma"

Other however are less circumspect. They say that Thantawi is setting up is own 'madhab' (sect). Maybe one day they will also accuse him of being a Zionist agent. We must bear in mind that the ulema have a very limited capacity to argue rationally.

Then there are other sheikhs who use other arguments against "Islamic" banks. They say that a "bank" cannot be "Islamic". Only a natural person can be "Islamic". In the Western concept of "limited liability" a company (like = a bank) can be a separate legal entity. Some ulema argue that such a separate legal entity cannot be Islamic. Hence if an "Islamic" bank has to take a mortgage over someone's house to make an "Islamic" housing loan, it is the Muslim directors of the bank who must hold the mortgage and not the bank. If the loan turns bad, the = Muslim directors of the bank will foreclose on the property and not the bank. Similarly if the "bank" issues Letters of credit or Guarantees and these are invoked, it is the Muslim directors who bear primary responsibility to honour such obligations and not the bank. Talk about risks and rewards.

Hence there is too much confusion about "Islamic" banking. Why'? Because there is no such thing as "Islamic" banking just likes there is no such thing as "lslamic" gardening
 
"Islamic" deep-sea fishing or "Islamic" road construction. It is just a foolish attempt by the ulema to reinvent the wheel. Since others have already done it, they want to show off that "We also have our very own very Islamic things".

There is a dubious hadith, which says that the ulema have indeed reinvented the wheel. They all it "the Islamic wheel". Colour of wheel: green. Source of hadith: Unknown.