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Banking on Sharia

Sharia banking is growing fast and the mainstream banks are starting to offer Islamic accounts. Its

Sharia-compliant, or Islamic, finance is committed to promoting goals any proud progressive would recognise: equity, moderation, social justice. It is a system that revolves around prudent lending, the reduction of risk, the sharing of profits and an absolute ban on speculation and the short-selling of stocks. Debt is actively discouraged and so dealings with any organisation that has a balance sheet more than a third of which is debt (which is to say, all banks!) are forbidden, as are investments in enterprises deemed unethical by Islamic scholars, such as casinos or weapons factories.

Perhaps the rarest feature, however, is the prohibition of interest - or making money out of money. As it is not permissible for banks to charge interest on their loans, sharia-compliant deals are usually structured so that the bank ends up leasing the property to the homeowner, who essentially ends up paying rent until ownership is transferred. Critics charge that the rent seems suspiciously similar to interest payments. They also point out that it ends up costing homeowners more to set up and pay off Islamic mortgages than conventional products, like with all other niche products and, in particular, ethical investments: the so-called "piety premium".

Islamic financiers disagree, stressing the joint-ownership and profit-sharing aspects of the sharia model. "The relationship between us and the customer is based on sharing risk and sharing the rewards from the financing and investments we make on their behalf," says Sultan Choudhury, commercial director at the Islamic Bank of Britain, this country's only stand-alone, sharia-compliant retail bank. "The returns are based on the amount of profit realised from each transaction."

Let me declare an interest here (in case you had not already noticed the name on the byline): I am a Muslim myself, a practising, believing Muslim. Yet, to my shame perhaps, I own not a single sharia-compliant financial product or asset. Until the recent implosion of the banking system, I had paid very little attention to the Islamic finance industry, assuming it was simply a niche activity at best, or a gimmick at worst. As a result, my own current account, pension, mortgage, loans and credit cards are all as traditional, conventional and mainstream as the next (non-Muslim) man.

Islamic finance marries the freedom of the market economy to the fairness of social democracy

Yet the reality is that Islamic finance is growing faster than any other subset of world banking, at an average annual rate of between 15 and 20 per cent. The IMF says the number and reach of sharia-compliant financial institutions worldwide has risen from one institution in one country in 1975 to more than 300 institutions operating in more than 75 countries today. Over the past year alone, sharia-compliant assets across the globe have grown by almost a third to more than $639bn, according to the latest analysis of the industry from the Banker magazine. If the current trends continue, Islamic finance will have broken through the $1trn mark by 2010.

Here in Britain, the Financial Services Authority has licensed five stand-alone Islamic banks - including the Islamic Bank of Britain, which has been reporting a significant increase in the number of non-Muslim customers applying for accounts since the start of the financial crisis. Bank officials say the numbers are growing because Islamic finance offers a "safer option" for savers and investors, regardless of faith. According to the Islamic Bank of Britain's marketing director, Steven Amos: "Our core business will always be Muslims, but the numbers of non-Muslims are really picking up. We've had increased interest and it's one of the number of reasons why we're insulated from the credit crunch."

To get an Islamic bank account you don’t have to go to the Islamic Bank of Britain only. So far, 20 major global banks have set up units to provide sharia-compliant financial services. HSBC began offering Islamic products and services to its customers in 2003; Lloyds TSB followed in 2005. The mainstream has gone Muslim.

Emile Abu-Shakra, spokesman for Lloyds TSB, explains. "We started offering Islamic financial products about three years ago and when we started out we were just in five branches around the country," he says. "Now we are in two thousand branches."

The bank has now expanded its range of products to include a current account, a mortgage, a student account, an investment fund and a business and corporate account. Its Islamic finance products are designed with Muslims in mind, but anyone can use them if they fulfil their needs.

Does Lloyds TSB believe further growth and diversification in the field are still possible? "The principles of Islamic finance could be applied to a number of different products, so there are possibilities for Islamic versions of credit cards, loans, saving accounts and asset finance as well," says Abu-Shakra. "It's just a matter of time."

The remarkable feature of Islamic financial institutions, products and assets is that, although they may have not produced fantastically high returns in any one year, they have produced consistent returns over the past decade - and continue to do so even now, in the wake of the credit crunch. This year, global markets are down by more than a third off their peak but the Dow Jones Islamic Financials Index, in comparison, has lost 7 per cent over the same period and actually rose 4.75 per cent in the most recent September quarter.

Such statistics make me truly wonder whether Islamic banking, with its antipathy towards excessive risk, debt and interest, and with its emphasis on linking deposits and investments to real, underlying assets, could have saved us from the credit crunch.

"Had the Islamic financing principle of fairness and the concept of investing in partnership been slightly more prevalent in conventional banking of late, events may have turned out a little differently," says Dan Taylor, head of banking at the accountancy giant BDO Stoy Hayward. "The Islamic principle of requiring securities to be backed by assets means that the use of, say, collateralised debt oblig a tions, or CDOs, would not have been allowed by sharia-compliant institutions."

Professor Rodney Wilson, who teaches Islamic finance at Durham University, agrees. He mentions that not a single sharia-compliant financial institution has failed since the start of the current crisis. Why? "Islamic banks follow a classical model of funding from their own deposits rather than borrowing from wholesale markets."

Excessive leverage is therefore not an option for a sharia-compliant bank - as opposed to conventional banks, which in this country by 2008 were lending out roughly £700bn more than they took in deposits, betting that the good times would go on for ever and tomorrow would never come.

Well, it did: the conventional banking sector is now on the verge of collapse. Meanwhile, Islamic institutions here in Britain continue to make money. The European Islamic Investment Bank, a UK AIM-listed sharia-compliant investment bank, reported revenues up 14 per cent in June 2008 interims. On the retail side, the Islamic Bank of Britain reported 5.5 per cent growth in customer numbers and 7.2 per cent growth in customer deposits in the six months to June.

So, it is no wonder that the British government - despite distancing itself from the Archbishop of Canterbury's ten tative support for sharia law courts - has been proactively encouraging the proliferation of sharia-compliant financial institutions for several years now. When he was chancellor, Gordon Brown repeatedly urged the City of London to become the "gateway to Islamic finance".

Just late last month, the government announced the launch of the first sharia-compliant pension funds, and officials are now even considering using special interest-free, asset-backed Islamic bonds, or sukuks, to help fund the building of the athletes' village for the London 2012 Olympics.


In America early last month, the US treasury

department hosted a course for policymakers called “Islamic Finance 101”. This followed a visit to Saudi Arabia by the treasury deputy secretary Robert Kimmitt, during which he confirmed that sharia-compliant finance is now firmly on his country’s agenda. “The US government is studying the salient features of Islamic banking to ascertain how far it could be useful in fighting the ongoing world economic crisis,” he said.

The Islamic finance industry is entering a brave and surprisingly welcoming new world - but obstacles remain. Determining exactly what is or isn't sharia-compliant, for example, can be difficult. Banks such as HSBC and Lloyds TSB have their own sharia advisory boards, made up of senior Islamic scholars, but one board's interpretation of compliance with the sharia is not necessarily the same as another's. Standardisation of rules and regulations across the sector is vital, but could take some time.

It could also be a while before we even have enough scholars to carry out the standardising - right now, according to one survey, there are only about 260 Islamic scholars worldwide who have the requisite knowledge, business savvy and linguistic skills.

However, others, like Professor Wilson, are more sanguine. "The shortage of qualified and experienced scholars should not be a problem in the longer run, as there are aspiring British Muslim scholars studying for higher degrees who have a good knowledge of both Islamic law and modern finance."

So Islamic banking is here to stay. It is a practical, viable and resilient alternative. To borrow a phrase from the Archbishop of Canterbury, the spread of sharia finance, if not sharia law, now "seems unavoidable".

I have even convinced myself: I now intend to invest in a sharia-friendly sukuk and to try to switch my interest-only conventional mortgage to an interest-free Islamic version. In this era of financial crises and economic chaos, it may be time for all of us - Muslims and non-Muslims, investors and savers alike - to join the halal banking revolution.

It may be our only hope.

Mehdi Hasan is news and current affairs editor at Channel 4

Mehdi Hasan is a contributing writer for the New Statesman and the co-author of Ed: The Milibands and the Making of a Labour Leader. He was the New Statesman's senior editor (politics) from 2009-12.

This article first appeared in the 15 December 2008 issue of the New Statesman, The power of speech

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The age of loneliness

Profound changes in technology, work and community are transforming our ultrasocial species into a population of loners.

Our dominant ideology is based on a lie. A series of lies, in fact, but I’ll focus on just one. This is the claim that we are, above all else, self-interested – that we seek to enhance our own wealth and power with little regard for the impact on others.

Some economists use a term to describe this presumed state of being – Homo economicus, or self-maximising man. The concept was formulated, by J S Mill and others, as a thought experiment. Soon it became a modelling tool. Then it became an ideal. Then it evolved into a description of who we really are.

It could not be further from the truth. To study human behaviour is to become aware of how weird we are. Many species will go to great lengths to help and protect their close kin. One or two will show occasional altruism towards unrelated members of their kind. But no species possesses a capacity for general altruism that is anywhere close to our own.

With the possible exception of naked mole-rats, we have the most social minds of all mammals. These minds evolved as an essential means of survival. Slow, weak, armed with rounded teeth and flimsy nails in a world of fangs and claws and horns and tusks, we survived through co-operation, reciprocity and mutual defence, all of which developed to a remarkable degree.

A review paper in the journal Frontiers in Psychology observes that Homo economicus  might be a reasonable description of chimpanzees. “Outsiders . . . would not expect to receive offers of food or solicitude; rather, they would be fiercely attacked . . . food is shared only under harassment; even mothers will not voluntarily offer novel foods to their own infants unless the infants beg for them.” But it is an unreasonable description of human beings.

How many of your friends, colleagues and neighbours behave like chimpanzees? A few, perhaps. If so, are they respected or reviled? Some people do appear to act as if they have no interests but their own – Philip Green and Mike Ashley strike me as possible examples – but their behaviour ­attracts general revulsion. The news is filled with spectacular instances of human viciousness: although psychopaths are rare, their deeds fill the papers. Daily acts of kindness are seldom reported, because they are everywhere.

Every day, I see people helping others with luggage, offering to cede their place in a queue, giving money to the homeless, setting aside time for others, volunteering for causes that offer no material reward. Alongside these quotidian instances are extreme and stunning cases. I think of my Dutch mother-in-law, whose family took in a six-year-old Jewish boy – a stranger – and hid him in their house for two years during the German occupation of the Netherlands. Had he been discovered, they would all have been sent to a concentration camp.

Studies suggest that altruistic tendencies are innate: from the age of 14 months, children try to help each other, attempting to hand over objects another child can’t reach. At the age of two, they start to share valued possessions. By the time they are three, they begin to protest against other people’s violation of moral norms.

Perhaps because we are told by the media, think tanks and politicians that competition and self-interest are the defining norms of human life, we disastrously mischaracterise the way in which other people behave. A survey commissioned by the Common Cause Foundation reported that 78 per cent of respondents believe others to be more selfish than they really are.

I do not wish to suggest that this mythology of selfishness is the sole or even principal cause of the epidemic of loneliness now sweeping the world. But it is likely to contribute to the plague by breeding suspicion and a sense of threat. It also appears to provide a doctrine of justification for those afflicted by isolation, a doctrine that sees individualism as a higher state of existence than community. Perhaps it is hardly surprising that Britain, the European nation in which neoliberalism is most advanced, is, according to government figures, the loneliness capital of Europe.

There are several possible reasons for the atomisation now suffered by the supremely social mammal. Work, which used to bring us together, now disperses us: many people have neither fixed workplaces nor regular colleagues and regular hours. Our leisure time has undergone a similar transformation: cinema replaced by television, sport by computer games, time with friends by time on Facebook.

Social media seems to cut both ways: it brings us together and sets us apart. It helps us to stay in touch, but also cultivates a tendency that surely enhances other people’s sense of isolation: a determination to persuade your followers that you’re having a great time. FOMO – fear of missing out – seems, at least in my mind, to be closely ­associated with loneliness.

Children’s lives in particular have been transformed: since the 1970s, their unaccompanied home range (in other words, the area they roam without adult supervision) has declined in Britain by almost 90 per cent. Not only does this remove them from contact with the natural world, but it limits their contact with other children. When kids played out on the street or in the woods, they quickly formed their own tribes, learning the social skills that would see them through life.

An ageing population, family and community breakdown, the decline of institutions such as churches and trade unions, the switch from public transport to private, inequality, an alienating ethic of consumerism, the loss of common purpose: all these are likely to contribute to one of the most dangerous epidemics of our time.

Yes, I do mean dangerous. The stress response triggered by loneliness raises blood pressure and impairs the immune system. Loneliness enhances the risk of depression, paranoia, addiction, cognitive decline, dem­entia, heart disease, stroke, viral infection, accidents and suicide. It is as potent a cause of early death as smoking 15 cigarettes a day, and can be twice as deadly as obesity.

Perhaps because we are in thrall to the ideology that helps to cause the problem, we turn to the market to try to solve it. Over the past few weeks, the discovery of a new American profession, the people-walker (taking human beings for walks), has caused a small sensation in the media. In Japan there is a fully fledged market for friendship: you can hire friends by the hour with whom to chat and eat and watch TV; or, more disturbingly, to pose for pictures that you can post on social media. They are rented as mourners at funerals and guests at weddings. A recent article describes how a fake friend was used to replace a sister with whom the bride had fallen out. What would the bride’s mother make of it? No problem: she had been rented, too. In September we learned that similar customs have been followed in Britain for some time: an early foray into business for the Home Secretary, Amber Rudd, involved offering to lease her posh friends to underpopulated weddings.



My own experience fits the current pattern: the high incidence of loneliness suffered by people between the ages of 18 and 34. I have sometimes been lonely before and after that period, but it was during those years that I was most afflicted. The worst episode struck when I returned to Britain after six years working in West Papua, Brazil and East Africa. In those parts I sometimes felt like a ghost, drifting through societies to which I did not belong. I was often socially isolated, but I seldom felt lonely, perhaps because the issues I was investigating were so absorbing and the work so frightening that I was swept along by adrenalin and a sense of purpose.

When I came home, however, I fell into a mineshaft. My university friends, with their proper jobs, expensive mortgages and settled, prematurely aged lives, had become incomprehensible to me, and the life I had been leading seemed incomprehensible to everyone. Though feeling like a ghost abroad was in some ways liberating – a psychic decluttering that permitted an intense process of discovery – feeling like a ghost at home was terrifying. I existed, people acknowledged me, greeted me cordially, but I just could not connect. Wherever I went, I heard my own voice bouncing back at me.

Eventually I made new friends. But I still feel scarred by that time, and fearful that such desolation may recur, particularly in old age. These days, my loneliest moments come immediately after I’ve given a talk, when I’m surrounded by people congratulating me or asking questions. I often experience a falling sensation: their voices seem to recede above my head. I think it arises from the nature of the contact: because I can’t speak to anyone for more than a few seconds, it feels like social media brought to life.

The word “sullen” evolved from the Old French solain, which means “lonely”. Loneliness is associated with an enhanced perception of social threat, so one of its paradoxical consequences is a tendency to shut yourself off from strangers. When I was lonely, I felt like lashing out at the society from which I perceived myself excluded, as if the problem lay with other people. To read any comment thread is, I feel, to witness this tendency: you find people who are plainly making efforts to connect, but who do so by insulting and abusing, alienating the rest of the thread with their evident misanthropy. Perhaps some people really are rugged individualists. But others – especially online – appear to use that persona as a rationale for involuntary isolation.

Whatever the reasons might be, it is as if a spell had been cast on us, transforming this ultrasocial species into a population of loners. Like a parasite enhancing the conditions for its own survival, loneliness impedes its own cure by breeding shame and shyness. The work of groups such as Age UK, Mind, Positive Ageing and the Campaign to End Loneliness is life-saving.

When I first wrote about this subject, and the article went viral, several publishers urged me to write a book on the theme. Three years sitting at my desk, studying isolation: what’s the second prize? But I found another way of working on the issue, a way that engages me with others, rather than removing me. With the brilliant musician Ewan McLennan, I have written a concept album (I wrote the first draft of the lyrics; he refined them and wrote the music). Our aim is to use it to help break the spell, with performances of both music and the spoken word designed to bring people together –which, we hope, will end with a party at the nearest pub.

By itself, our work can make only a tiny contribution to addressing the epidemic. But I hope that, both by helping people to acknowledge it and by using the power of music to create common sentiment, we can at least begin to identify the barriers that separate us from others, and to remember that we are not the selfish, ruthless beings we are told we are.

“Breaking the Spell of Loneliness” by Ewan McLennan and George Monbiot is out now. For a full list of forthcoming gigs visit:

This article first appeared in the 20 October 2016 issue of the New Statesman, Brothers in blood