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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What’s it like to be a human rights activist in post-Pussy Riot Russia?

It is five years since the feminist punk collective crashed Moscow’s Cathedral in a performance that got some of them jailed.

On 21 February 2012, five brightly-dressed members of Russian feminist punk collective Pussy Riot took to the alter of Moscow’s Cathedral of Christ the Saviour to protest links between the Russian Orthodox Church and its “chief saint” Russian President Vladimir Putin. “Virgin birth-giver of God, drive away Putin!” they shouted from beneath now-iconic balaclavas.

The “Punk Prayer” was both a political statement and a powerful feminist message. Six months later, a judge sentenced three of the girls to two years in prison (one was rapidly released) on a conspicuously apolitical conviction of “hooliganism motivated by religious hatred”.

These past five years, Russia’s involvement in crises in Syria and Ukraine has cast a dark shadow over relations with an increasingly cleaved-off West. The year 2015 saw opposition politician Boris Nemtsov murdered some 500 metres from the Kremlin walls.

Domestically, society has constricted people challenging the political status quo. However, low-key initiatives retain traction.

“Artists are simply silent,” says Russian curator and gallerist Marat Guelman, who left for Montenegro in early 2015. “It is better not to say anything about politics, it is better to bypass these issues.”

This is a major difference from five years ago. “Despite persecution against Pussy Riot, people were not afraid to defend them,” he says. “It was a better time.”

There are three topics artists and curators now avoid, says artist and feminist activist Mikaela. One is “homosexuality . . . especially if it involves adolescents”, she says, citing a 2015 exhibit about LGBT teens called “Be Yourself”. Authorities closed it and interrogated the galley owner. “Then the war in Ukraine,” she says. “Russian Orthodoxy is the third topic you cannot tackle.”

Marianna Muravyeva, a law professor at Moscow’s Higher School of Economics, says that aside from the government completely discarding human rights rhetoric, the most significant legal change is the “gay propaganda” law and “legislation against those who insult the feelings of believers”.

The latter came into force in July 2013. Since then, the Orthodox Church has made deeper societal incursions. Muravyeva says that the secular nature of the Soviet Union led to residual feelings of guilt towards the Church – and now it uses that “capital”.

Mikaela observes a “cultural expansion”, citing a new TV channel, radio station and three new churches in her neighbourhood alone.

Orthodox activist attacks on exhibits have increased. In August 2015, they targeted an exhibit at one of Moscow’s most prominent art galleries. Its perpetrators were found guilty of “petty hooliganism” and handed a 1,000 rouble fine (£14 by today’s rates).

“Any word written in Old Slavonic lettering is spirituality,” says Guelman. “Any work of art by a modern artist . . . depravity, sin, the impact of the West.”

Similar groups are active across Russia, and galleries err on the side of caution. Perpetrators, while self-organised, believe their actions to be state-sanctioned, says Muravyeva. They are influenced by “the kinds of messages” conveyed by the government. 

Nowadays, self-organisation is integral to artistic expression. Mikaela witnessed educational institutions and foreign foundations telling artists “we are with you”, “we know you are smart” but they cannot host political works for fear of closure. Not knowing where the “invisible line” lies foments uncertainty. “It’s self-censorship,” she says.

Dissident artist Petr Pavlensky, notorious for nailing his scrotum to the Red Square in late 2013 (“Fixation”) and setting fire to the doors of the FSB in 2015, advocates personal agency.

“Fixation” was about a sense of helplessness in Russia that must be overcome; he tried to convey the amount of power the castrated have. “Pavlensky says, ‘Look, I have even less than you’,” says Guelman. The artist and his partner Oksana Shalygina are now in France intending to seek asylum after sexual assault accusations.

Some rise to the opportunity, such as Daria Serenko. She rides the Moscow Metro carrying political posters as part of Tikhy Piket or “Silent Protest”. Her 12 February sign depicted a girl with her head in her arms inundated by the comments received if a women alleges rape (“she was probably drunk”, “what was she wearing?”).

However, as a lone individual in a public space, she experienced hostility. “Men, as always, laughed,” she posted on Facebook afterwards. Earlier this month an anonymous group pasted painted plants accompanied by anti-domestic violence messages around Omsk, southwestern Siberia.

Their appearance corresponded with Putin signing legislation on 7 February decriminalising domestic abuse that causes “minor harm”. While it doesn’t specifically mention women, Muravyeva says that the message “women can manage on their own” is a “disaster”.

On 27 January, after Russia’s parliament passed the final draft, pro-Kremlin tabloid Life released a video (“He Beats You Because He Loves You”) showing how to inflict pain without leaving a mark.

Heightened social awareness is aided by online networks. Since “Punk Prayer”, the proportion of people using the internet in Russia has exploded. In 2011, it was 33 per cent, while in 2016 it was 73 per cent, according annual Freedom House reports. Authorities have concurrently exerted stronger controls over it, eg. targeting individual social media users through broadly-worded laws against “extremism”.

Last July, the hashtag #ЯНеБоюсьСказать (“#IamNotAfraidtoSay”) went viral. Women documented experiences of sexual violence. Russian organisation Сёстры (“Sisters”), which helps survivors receive psychological support, receives “250-350” crisis calls annually.

“Over the past year, the number of applications increased,” because of the hashtag, it says. New media platforms Meduza and Wonderzine also emerged as more “socially aware” outlets. Previously “all we had was LiveJournal communities,” Mikaela says.

Bottom-up challenges are partially due to a generational shift. “Nobody bothered before,” says Muravyeva. “Those children who were born after ‘95 . . . they were already born in a very free society – they don’t know what it is to be afraid, they don’t know what it is to be self-censoring, what it is to be really scared of the state.”

Aliide Naylor is a British journalist and former Arts and Ideas Editor of The Moscow Times.

> Now read Anoosh Chakelian’s interview with Nadya Tolokonnikova of Pussy Riot