There's an interesting summary article on "kosher" Islamic Banking over at American.com (a business online magazine with a strong pro-free-trade bent). They take a detailed, if skeptical, look at Islamic Banking and note the increasing trend of the major financial institutions to embrace variants of it. This quote from the opener:
Islam prohibits the payment of interest on loans, so observant Muslims require specialized alternative arrangements from their banks. Many of the largest global financial companies, including Deutsche Bank and JPMorgan Chase, have established thriving subsidiaries that strive to meet these requirements. As a result, optimists speculate that the common pursuit of lucre—divinely sanctioned, filthy, or otherwise—will bring bickering civilizations together. They may be right.
reminds me of Voltaire's famous quote:
Go into the London Stock Exchange - a more respectable place than many a court - and you will find representatives of all nations gathered there for the service of mankind. There the Jew, the Mohammedan and the Christian deal with each other as if of the same religion, and give the name of infidel only to those who go bankrupt. There the Presbyterian trusts the Anabaptist and the Anglican accepts the Quaker's promise. (via OPR, quoted in D. Boaz, Libertarianism: a Primer, New York, Basic Books 1997, p. 38.)
May it be so again, inshallah.
Unsurprisingly, coming from a free-market platform (and non-muslim besides), the article has a cynical tinge as to whether the Islamic aspect of Islamic banking is genuinely viable:
What the “Islamic” label might mean is left to the beholder. The sharia scholars make it their business to pronounce only upon the letter of the law. Like legal practitioners everywhere, they focus on the technicalities. The spirit, being intangible, tends not to cloud their rulings. The leading critics of this inconsistency are political Islamists themselves. Majed Jarrar, a personable young man who studies electrical engineering, wears a long beard, and is keen to discuss his faith, recently opened an account with FIBE here in Cairo, only to let it sit empty. He’s been investigating whether “it’s actually Islamic or not,” and he doesn’t like what he’s finding.
When I asked him about the sort of innovation that, for example, Hussein Hassan at Deutsche Bank is involved in, Majed scoffed. Recalling a similar campaign by a Gulf-based Islamic financial house (“creative Islamic Solutions” was the slogan), Majed argued that sharia law is less about innovation than it is about a return to the ways of seventh-century Arabia.
Despite the zeal of purists like Jarrar, an entire banking sector without debt would be far too unstable. Such a system has never had to exist—medieval Islam had extensive regulations governing trade relations and individual contract law, but there was no banking, so there were no banking rules.
Fair enough, but where there is a will there is a way; and I think that we are seeing the infancy of modern Islamic banking, not its peak. It's perfectly reasonable for halal banking to start out resembling the interest-driven systems it seeks to compete with, but the expectation is that it will in time evolve in a divergent fashion, compatible with its distinct principles. As more and more money enters the halal system, it will begin to amass the leverage to write its own rules.
I daresay that 22nd century halal banking with neither resemble 21st century modern banking nor 7th century preIslamic opportunism. The article ends,
...there’s something reassuring about the way that the rational profit motive trumps strict ideology. The willingness to put profit first is, it turns out, the real shared value that links Islamic and Western civilizations.
True. But no one said that there was only one path to profit. Strict ideology might not be up to the task, but the optimist in me believes that ideology and profit motives alike are compatible in the long run.