Own goal as Qatar orders non-Islamic banks to close their Islamic divisions
Posted on 07 February 2011 with 4 comments from readers
Western banks like HSBC and Standard Chartered that also offer their clients Islamic banking alongside traditional banking have been told to close their Islamic operations in Doha.
This is a blatantly protectionist move designed to win business for local Islamic banks while at the same time removing the competition posed by the rigorous internal systems and international networks of the giants of global banking. It is a step backwards for Islamic banking in the long-run.
Faith-based banking
In recent years Islamic banking has been in the ascendant, particularly in the Muslim world. The muddling of personal faith and finance has been a profitable marketing proposition, and so complex are the products assembled by Islamic bankers that even the practitioners sometimes struggle to explain them properly.
A whole jargon has grown up around Islamic banking, often more confusing than it is enlightening. A cynical person might almost conclude that this is just a ruse to part the innocent from their money and then to profit from it without them understanding how. But then that would call into question the good faith of the management of these institutions and the link with religion makes that impossible.
Global standards
The introduction of Islamic services by HSBC and Standard Chartered marked something of a coming of age for Islamic banks. These banks are acknowledged as reliable global custodians even if their own densely packed rules and regulations are intended to cheat customers who do not spend their time reading them.
Take that support away and Islamic finance loses something important, and so too does Qatar as a banking centre, although since the demise of the Qatar Financial Centre things have been rather quiet. It is to be hoped the Qatari central bank reconsiders this own goal, and recognises that if Islamic banking is going to be taken seriously then it needs the global banks.
4 Comments posted by readers:
I disagree, as the murky waters of “western” style banking have clouded, what should have been, clear waters.
Only the other week somebody was telling me that there was no relationship between Islamic Banking and religion!
Today I see ADIB are promoting a “Protected BRIC Note”, yet another example of following where Lehman led and contradicting the whole concept of Islamic banking, which is participatory.
The author is wrong on so many level… by definition, a conventional interest reaping insitutiton cannot fund an ‘islamic window’ ..the very nature is contradictory…as far as protectionism is concerned, well thats rubbish too…how can you be protectionist in abolishing something which under the ‘trade descriptions act’ in the UK would have been shut down on inception for misleading the public!!!!
….alternatively hsbc could just close down completely and recapitalise itself as a purely global islamic bank….no? too hard to do? i thought so…..qatar is doign the right thing…..
HSBC does not run an “Islamic window”. It has an independent subsidiary company “Amanah” that runs with both Global and regional Shariah supervisory boards. It also operates in the UK without falling foul of the Trade Descriptions Act.
The key point here is that you cannot arbitrarily close down with no notice a company that has been working within the law.
This kind of impulsive and amusingly idiotic decision is fairly common in the Gulf. It is usually made by someone who has “inherited” his position. The good thing about the region is that wiser heads working in the background will subtly undermine and eventually kill the proposal in a way that the originator does not lose face.
So called Islamic finance is a complete charade, the author is correct in his cynicism. The prohibition on usury is an extremely serious matter in Islamic thought, which is obviously linked to the Old Testament prohibition on usury (albeit there it is an intra-tribal concept).
All paper currencies are loaned into existence at interest, which gradually compounds over time. No amount of voodoo by “scholars” can change the nature of the underlying currency; thus the whole endeavour is basically a farce to mislead those who are less educated about the nature of the world financial system.
GCC countries should shutdown every “Islamic bank.” There is no such thing as an Islamic bank based on AED/QAR/SAR/etc. Of course, not holding my breath for that…