Almost $900 billion in resources throughout the world are directed by Islamic banks that work according to sharia, an commentation of Islamic law. In recent years, so-called Islamic finance has been growing at a rate of 15-20 % a year, and proved outstandingly flexible to the financial crisis. Supporters of the comparatively new sector point out to its back-to-basics financial structures, which have made it favourite with a lot of non-Mulsim customers who have little desire for risk. However, reviewers say the limitations coming with prohibitions, such as, on paying interest and investing in anything that involves porn, pork or alcohol are archaic and impracticable.
Canada, with its 1.3 million Muslims, has fallen behind countries like the U.K. and the U.S. in grasping sharia-compliant financial produces. None of the country’s big banks presently provide sharia-compliant services, however, some smaller competitors do. Toronto-based UM Financial Inc., which issued home mortgages obeying the Islamic law, registered for bankruptcy last year, leaving 170 Muslim borrowers in uncertainty, and opening a legal can of worms. Is the firm’s collapse proof that Canada should keep away from Islamic finance; or evidence that the country requires more of it (i.e. that the banks and policymakers need to bring the practice into the principal, with stricter rules and better supervision? We asked the experts to interfere.
Tarek Fatah is the establisher of the Muslim Canadian Congress, a liberal-minded ingrained organization. He is also the writer of “Chasing a Mirage”: The Depressing lllusion of an Islamic State, among other works. Walid Hejazi is associate professor of global business at the University of Toronto’s Rotman School of Management. He is presently giving lectures on the MBA course about Islamic finance.