Growing state of Islamic finance

Over $100bn Sukuk, or Islamic bonds, are set to be issued this year

The Economist's Graphic Detail blog has a post up graphing the rise of sukuk, Islamic bonds, which are a subset of the $1.3trn market for Islamic finance.

They write:

According to the latest quarterly report from Zawya, a business information firm, global sukuk issuance in the first quarter of this year was $43.3 billion, almost half the total for the whole of 2011. The withdrawal of European banks lending to the Gulf Co-operation Council (GCC) region is thought to have contributed to this rise. Total issuance could reach $126 billion this year, continuing the growth trend (aside from a brief decline in 2008 associated with the global economic slowdown).

Their post also addresses the global spread of such bonds, which are concentrated in Malaysia.

Sukuk (singular sakk, which has the same Persian root as the word "cheque") are financial instruments issued to be compatible with Islamic law, sharia.

The problem is that sharia prevents a lot of practices usually considered crucial for finance. Chiefly, there is the prohibition against riba, or interest. Similar to early Christianity, Islam regards interest as unearned and unjust income, creating money from money with no services provided. For instace, the Qu'ran states:

Allah has permitted trade and has forbidden interest.

And riba is held to be one of the seven greatest sins in Islam, along with murder and believing in Gods other than Allah.

Unfortunately, most of the financial world works on credit and debt, which is hard to give and receive without some compensation. This is where Islamic finance in general, and sukuk in particular, steps in.

Operating in a similar manner to Islamic mortgages, but on a much larger scale, a sakk replaces loans and interest with part-ownership and rent. For a business, for instance, the normal practice may be to borrow money needed to finance an expansion, then an annual coupon on that money at the market rate for a decade before paying back the capital in one lump sum.

The Islamic method would be to split its proposed expansion into chunks, sell each of those bits to new owners, and rent them back from the new owners until the time came to buy back the whole thing. The rental rate is usually conveniently close to the market interest rate – and occasionally explicitly pegged to a rate like LIBOR, although being this explicit is still frowned upon by many scholars.

A further complication is introduced by the fact that while assets are tradable, debts – which are not considered to hold any inherent value – aren't. So a bond issued in the above example would be tradable if it were used to finance an expansion, but not if it merely paid for day-to-day business. In the former case, it could be denominated in fractions of the new asset, but in the latter it would have to be debt.

As the market grows, the edge cases are pushing ever harder at the limits of what is acceptable under sharia. Some progressive scholars are using the concept of maslaha, which states that decisions about prohibition should take into account the public interest, to argue that activities which are necessary but tricky to condone should nonetheless be allowed.

When religious law meets the pressures of the modern day, strange contortions are often the result (look at things like the Los Angeles eruv), but if the sukuk market grows at the rate it has been, it won't remain a novelty for much longer.

Malaysia's Petronas Towers. The country is home to most sukuk trading. (Getty)

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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“Trembling, shaking / Oh, my heart is aching”: the EU out campaign song will give you chills

But not in a good way.

You know the story. Some old guys with vague dreams of empire want Britain to leave the European Union. They’ve been kicking up such a big fuss over the past few years that the government is letting the public decide.

And what is it that sways a largely politically indifferent electorate? Strikes hope in their hearts for a mildly less bureaucratic yet dangerously human rights-free future? An anthem, of course!

Originally by Carly You’re so Vain Simon, this is the song the Leave.EU campaign (Nigel Farage’s chosen group) has chosen. It is performed by the singer Antonia Suñer, for whom freedom from the technofederalists couldn’t come any suñer.

Here are the lyrics, of which your mole has done a close reading. But essentially it’s just nature imagery with fascist undertones and some heartburn.

"Let the river run

"Let all the dreamers

"Wake the nation.

"Come, the new Jerusalem."

Don’t use a river metaphor in anything political, unless you actively want to evoke Enoch Powell. Also, Jerusalem? That’s a bit... strong, isn’t it? Heavy connotations of being a little bit too Englandy.

"Silver cities rise,

"The morning lights,

"The streets that meet them,

"And sirens call them on

"With a song."

Sirens and streets. Doesn’t sound like a wholly un-authoritarian view of the UK’s EU-free future to me.

"It’s asking for the taking,

"Trembling, shaking,

"Oh, my heart is aching."

A reference to the elderly nature of many of the UK’s eurosceptics, perhaps?

"We’re coming to the edge,

"Running on the water,

"Coming through the fog,

"Your sons and daughters."

I feel like this is something to do with the hosepipe ban.

"We the great and small,

"Stand on a star,

"And blaze a trail of desire,

"Through the dark’ning dawn."

Everyone will have to speak this kind of English in the new Jerusalem, m'lady, oft with shorten’d words which will leave you feeling cringéd.

"It’s asking for the taking.

"Come run with me now,

"The sky is the colour of blue,

"You’ve never even seen,

"In the eyes of your lover."

I think this means: no one has ever loved anyone with the same colour eyes as the EU flag.

I'm a mole, innit.