CENTER FOR SECURITY POLICY TEACHING THE U.S. TREASURY ABOUT ISLAMIC FINANCE 101!

Sheild of the US Treasury.

The Treasury Department has announced it will teach “Islamic finance” to U.S. banking regulatory agencies, Congress and other parts of the executive branch today in Washington, D.C. – but critics say it is opening a door to American funding of Islamic extremism.

‘Islamic Finance 101′

According to its announcement, the “Islamic Finance 101″ forum is “designed to help inform the policy community about Islamic financial services, which are an increasingly important part of the global financial industry.”

The Treasury Department has collaborated with Harvard University’s Islamic Finance Project to coordinate the event. The department says it expects about 100 people will attend the seminar.

Some speakers include Assistant Secretary of the Treasury Neel Kashkari, senior adviser to Treasury Secretary Henry Paulson, Jr.; Harvard Business School professor Samuel Hayes; Mahmoud El-Gamal, chair of Islamic economics, finance and management at Rice University and Islamic finance adviser to the Treasury Department; Sarah Bell of the Federal Reserve Bank of New York; Yusuf Talal DeLorenzo, Shariah adviser and Islamic scholar; Michael McMillan, chair of the Islamic Legal Forum at the American Bar Association and professor of Islamic finance; and Rushdi Siddiqui, global director for the Dow Jones Islamic Market Indexes and vigorous advocate for Islamic finance.
Source : Shariah Finance Watch

European takes closer look at Islamic financing

PARIS: With commercial bank financing tight, Europeans have been taking a closer look at Islamic banking.
"The potential is there," Ahmad Jachi, the first deputy governor of the Central Bank of Lebanon, said at a conference this past week in Paris. "It's a matter of really enabling and creating the market."
Islamic banking has already been integrated into the British and German banking systems, and banking executives at the conference said efforts were under way to allow Muslims in France to bank and invest under regulations that conform to Shariah, the legal code of Islam.
Estimates of the Islamic banking market's current size vary from $500 billion to $1 trillion. It has only about 5 percent of the overall banking market, but attendees at the conference, which was sponsored by The Economist, said Islamic banking has a huge potential for growth, since one-sixth of the world's population is Muslim.
The International Monetary Fund estimates that the Islamic banking sector has grown 10 percent to 15 percent a year over the past decade.

American Muslims continue to engage in politics and are beginning to have more impact than before. By Muqtedar Khan

…all men shall be free to profess, and by argument to maintain, their opinion in matters of religion, and that the same shall in no wise diminish, enlarge, or affect their civil capacities.

-- , United Nation (1786).

In this presidential election cycle, American Muslims became a subtext of American politics that exposed the profound religious bigotry embedded in some segments of American society.

A few months ago, some unscrupulous activists were sending emails claiming that Barak Obama was secretly a Muslim and in spite of repeated denials, often vehement ones, by the Obama campaign, for a long time nearly 10% of the country believed in them. The main assumption behind this tactic was that for some the mere possibility that Obama was Muslim was sufficient to discredit him.

The irony of this episode during the campaign season is that the cads who were claiming that Obama was secretly a Muslim were banking on the existence of religious bigotry amongst McCain's supporters. The subtext of this tactics: We have many bigots in our society let us exploit this reality by spreading lies about Obama's faith.

Another episode highlights the persistence of prejudice. At a campaign event, John McCain took the microphone away from a supporter who was saying that Obama was an Arab and said "No, ma'am. He's a decent family man [and] citizen that I just happen to have disagreements with on fundamental issues and that's what this campaign's all about. He's not [an Arab]."

McCain's answer was more distressing than the sentiment of his ignorant follower. The gist of his reply appears to be that Obama is not an Arab; he is a decent family man and a citizen. The subtext of his answer: Arabs are foreigners, indecent and have no family values; and since Obama was a decent fellow he could not be an Arab.

So why do some in a party that has been served so well by Arab Americans like John Sununu, a former governor and current senator from New Hampshire, and Spencer Abraham the former senator from Michigan and co-chairman of the Republican Party (there are many more examples) fear and disapprove of Arabs? Well the subtext is: For some Arabs are ok as long as they are Christians; it's the Muslim ones who are unacceptable.

This is such a shame. But fortunately the Republican Party's afflictions are not mainstream anymore. America has changed significantly and for the better.

Most Americans know that the bipartisan 9/11 Commission report not only exonerated American Muslims of any connections to the attacks on 9/11, but also did not see them as a future threat at all. Several studies have found American Muslims to be typical examples of mainstream, upwardly mobile, middle class Americans, who far from being suspect are an asset to this nation.

American Muslims continue to engage in politics and are beginning to have more impact than before. In the past two years, Americans have elected two practicing and openly Muslim Muslims to the U.S. Congress; Keith Ellison from Minnesota's fifth district and Andre Carson from Indiana's seventh district.

Zalmay Khalilzad is currently the U.S.' ambassador to the United Nations and has in recent years served as the U.S. ambassador to Iraq and Afghanistan. Fareed Zakaria, who like Khalilzad is also a Muslim, is now a major voice in America's political discourse. And Kareem Khan, who won a Bronze Star, and a Purple Heart, was martyred in Iraq while fighting for America.

They are all American heroes; extraordinary, each one of them. They show that in elected office, in government bureaucracy, in the military and in civil society; American Muslims are fighting the tide of Islamophobia, overcoming prejudice, and finding their rightful place in society.

General Colin Powell in his endorsement of Obama's candidacy, said: "'I am also troubled by - not what Senator McCain says - but what members of the Party say, and it is permitted to be said: such things as, "Well, you know that Mr. Obama is a Muslim." Well, the correct answer is he is not a Muslim. He's a Christian; has always been a Christian. But the really right answer is, "What if he is? Is there something wrong with being a Muslim in this country?"

No General Powell. There is nothing wrong with that. I am a Muslim, and a proud one at that.

Subtext: I voice my thoughts freely, boldly, and frequently. And like you, I too will fight to keep this country free – free from prejudice, free from xenophobia and free from intolerance.

Source : IslamOnline

The Influence of the Implementation of Sharia Principles in Banking: by M. Suyanto

The objective of my research was to analyze the influence of the implementation of sharia principles on the bank performance and the welfare of employees and society involved in the activities of Sharia Banks in Indonesia by selecting the bank performance as an intervening variable. The population of this research was sharia banks in Indonesia between 2002 and 2006. The structural equation modeling (SEM) was used to analyze a series of dependence relationships among variables simultaneously.
The study of several concepts and indicators in sharia banking revealed the following models. First, the implementation of sharia principle variable was influenced by several indicators, i.e., sharia financing, sharia funding, and aqad compliance. Second, the bank performance variable was influenced by a number of indicators, i.e., profitability, solvency, and commitment to community. Third, the society welfare variable was affected by indicators of financing, qordul hasan and zakat-infaq-sodaqoh. Fourth, the employee welfare variable was influenced by the indicators of salary-bonus, general benefits and relegious benefits.
The results showed that first, the implementation of sharia principles had a positive and significant influences on the Sharia Bank performance of at α = 0.05 with a path coefficient of 0.95 and p value of 0.000, suggesting that the implementation of sharia principles in Sharia Banks in Indonesia which is getting better, more consistent and more sustainable would, in turn, improve the bank performance or result in the higher profitablility and solvability and give the benefit to the small business entrepreneurs joining the Sharia Banks as customers. Second, the implementation of sharia principles had an insignificant influences on the welfare of society involved in the activities of Sharia Banks in Indonesia at α = 0.05 with a path coefficient of -0.23 and p value of 0.671, indicating that the implementation of sharia principles in Sharia Banks in Indonesia which is getting better, more consistent and more sustainable would not increase the welfare of society involved in the activities of Sharia Banks in Indonesia or would not increase the financing and qordul hasan portions as well as zakat-infaq-sodaqoh and social activities. Third, the implementation of sharia principles had an insignificant influences on the employee welfare of Sharia Banks at α = 0.05 with path coefficient of -0.03 and p value of 0.942, maintaining that the implementation of sharia principles in Sharia Banks in Indonesia which is getting better, more consistent and more sustainable would not improve the employee welfare of Sharia Banks. Fourth, the Sharia Bank performance had an influence on the welfare of society involved in the activities of Sharia Banks in Indonesia at α = 0.05 with path coefficient of 1.24 and p value of 0.034, revealing that an excellent performance of Sharia Bank would, in turn, improve the welfare of society involved in the activities of Sharia Banks in Indonesia.. Fifth, the Sharia Bank performance had a significant influence on the employee welfare at α = 0.05 with a path coefficient of 1.01 and p value of 0.027, explaining that an excellent performance of Sharia Bank would also improve the employee welfare in Sharia Banks in Indonesia.
Other findings showed an indirect effect, i.e., the implementation of sharia principles with the bank performance as the intervening variable, had a positive and significant influences on the employee welfare, with a path coefficient value (indirect effect) 0.96, suggesting that the implementation of sharia principles in Sharia Banks in Indonesia which has been getting better, more consistent and more sustainable, would result in the higher the bank performance. The higher the bank performance would, in turn improve the employee welfare of Sharia Bank. The implementation of sharia principles with the bank performance as intervening variable had a positive and significant influences on the society welfare, with a path coefficient value (indirect effect) 1.18, indicating that the implementation of sharia principles in Sharia Banks in Indonesia which has been getting better, more consistent and more sustainable, would result in the higher bank performance. The higher bank performance would, in turn, improve the welfare of society involved in the activities of Sharia Banks in Indonesia.
Based on the findings of the research, it can be concluded that the implementation of sharia principles in Sharia Banks in Indonesia which has been getting better, more consistent and more sustainable would, in turn, improve the bank performance. Moreover, the excellent of the bank performance would exert a significant effect on the welfare of employees and society involved in the activities of Sharia Banks in Indonesia.

Islamic Banking: Opportunity or Threat?

According Rodney Wilson, director of postgraduate studies at Durham University's Institute for Middle Eastern and Islamic Studies, Islamic banking, which implies the avoidance of interest, has become a substantial industry during the last four decades. One obvious question is whether its emergence further segregates Muslims from Western values and norms, creating a financial ghetto. An alternative view is that as increasing numbers of people in the West are dissatisfied or skeptical about the banking services they receive, and see them as exploitative or even unethical, the emergence of Islamic banking with its own distinctive morality results in Islam projecting a much more positive face.

Many Western bankers view Islamic finance as a curiosity, and perhaps even a business opportunity, but seldom as a threat comparable to that from Muslim extremism. Indeed, Islamic banking and finance can be regarded as a gentler aspect of Islam, and one that lends itself to dialogue between Westerners and Muslims.

Islamic retail financial institutions, including the Islamic Bank of Britain, the European Islamic Investment Bank, and Lariba Bank in California, are now well-established in a number of Western countries. Furthermore, the leading international banks, including Citibank, HSBC Amanah, Deutsche Bank and UBS of Switzerland, all offer Islamic deposits and Shari'a-compliant financing facilities.

There has been much dialogue between the Western bankers working in these institutions and the Shari'a scholars who advise what is, and what is not, permissible. This dialogue extends to insurance, where Islamic takaful companies have become increasingly active, their distinguishing feature being that they do not hold conventional interest-yielding bonds, and that shareholder funds and premiums paid by policy holders cannot be co-mingled, which could result in the former exploiting the latter's misfortune.
As Shari'a is about universal, divinely inspired principles rather than national laws, leading international law firms have also become involved in Islamic banking and finance, as contracts need to be drafted under English or American law in a way that is consistent with Shari'a. Indeed, the main job of the Shari'a committee members who serve on the boards of Islamic banks and conventional banks offering Islamic products is to ensure that new contracts are compatible with Shari'a principles and, if they are not, to pursue a dialogue with the lawyers concerning amendments and redrafting.

The aspiration of many Islamists is to have divinely inspired Shari'a replacing man-made laws, perhaps even the establishment of a universal caliphate under which everyone, Muslim and non-Muslim, should live. Not surprisingly, such an aspiration is unacceptable for most non-Muslims, and indeed for many Muslims, as it denies choice.

Islamic banking and finance can point to the way forward: it is about extending choice, not restricting options. As each institution has its own Shari'a board, Shari'a compliance is effectively privatized, rather than being a matter of national law. Indeed, each Shari'a board passes its own fatwas, or religious rulings, which further extends choice in the marketplace for religious ideas. Religion, of course, flourishes under competitive conditions and Islam is no exception, whereas when it is nationalized, its adherents soon become alienated.

The Islamic Republic of Iran can be regarded as an example of how not to encourage the development of Islamic banking and finance. There, all banking has been Shari'a - compliant since the Law on Interest Free Banking was passed in 1983. Bank clients have therefore no choice but to use the Shari'a system. The banks, however are state-owned and have little autonomy, even in determining what deposit and financing products to offer. They also do not have Shari'a committees, the argument being that this is unnecessary as the law ensures Shari'a compliance in any case.

The result has been that banking development has been slow, there is little financial innovation, and most Iranians do not have bank accounts. In contrast, on the Arab side of the Gulf and in Malaysia, where Islamic and conventional banks compete, Islamic banks have attractive products on offer and a growing client base. Al Rajhi Bank of Saudi Arabia has become the world's largest Islamic retail bank, and its range of services and delivery channels compares favorably with the best that Western banks can offer.
Islamic banking is here to stay, it is an opportunity rather than a threat, and it has an exciting future. Gaps remain-there is no Islamic bank in Israel, for example, to serve its Muslim population. But if the Central Bank of Israel licensed such an entity it could create much goodwill. It might also encourage the Jewish population living there to question whether the operations of their own banks are compatible with religious teaching in Leviticus and Deuteronomy.

Ultimately Islamic banking and finance is about the emergence of a distinctively Islamic form of capitalism that may co-exist and interact with Western, Chinese, Russian or any other capitalism. Such a development should be welcomed and facilitated, and not hindered or suppressed.