Egypt's top Muslim cleric Mufti Ali Gomaa has said that all of the banks operating in this country offer no riba (usury), reopening the issue of interest and Shariah-compliant banking. The fatwa (an edict based on Islamic law), which was issued last week, has paved the way for a new era of understanding modern finance from an Islamic perspective, according to one analyst. In the Muslim world, where religious values cast their shadow on all aspects of life, riba is considered haram (unlawful) by all means. In 1965, Egypt's Islamic Research Centre, an influential arm of Al- Azhar, issued a fatwa banning interest on all types of loans. Based on the Holy Qur'an, the fatwa described interest as a form of ususry, which is forbidden in Islam. "Those who devour interest shall not stand on the Day of Judgment, but like standing of one whom the evil spirit has by touching made mad. This is because they said 'The trade too is like interest,' and Allah made trade lawful and made interest unlawful." (Surat Al-Baqarah 2:275). It is even argued that interest may be also banned in the Bible, where the Lord said: "Do not charge your neighbour interest, whether on money or food or anything else that may earn interest, but a brother sraelite..." (Deuteronomy 23:19-20). Is there a contradiction between the two fatwas? Do commercial banks offer halal (lawful) transactions? "It's not the job of an economist to say whether a business transaction is halal or haram. Clerics should decide that. Economists or bankers do their best to maximise returns in any entity whether it's interest-free or not," Sherif Shawqi, a researcher at Alexandria University, told the Egyptian Mail in an interview. Before joining Al-Azhar, Mufti Gomaa graduated from the Faculty of Commerce, Cairo-based Ain Shams University in 1973, so the Sheikh is speaking from experience. "Supposedly, the fatwa will break the ice. Many people think commercial banks deal in riba, which is by no means true. Riba in the time of Prophet Mohamed [Peace be upon him] was different," Shawqi argued. "People used silver and gold coins (dirhams and dinars). These coins had intrinsic value. They all had a fixed weight of metal. Therefore, any bonus asked above the loan would certainly be riba," he explained. Since the launch of the first bank in the world, the Amsterdamsche Wisselbank (Amsterdam Exchange Bank) in 1609, banks have been trading in money, receiving savings and creating credit by definition. "Islamic banks seek profit like any other financial organisations. For those who think interest is haram, they provide a good alternative to traditional banks," he said, adding that Islamic operations depend on the sharing of profits and losses. "Islamic banks work on a wide scale of investments through three basic mechanisms: musharaka (partnership), mudharabah (speculation) and murabaha (profit-making)," he said. In musharakah, a bank may join another entity to set up a joint venture. Mudharabah means that a bank contributes the finance and the client provides the expertise, management and labour, while murabaha is financing projects on the basis of an estimated rate of return. In his Islamic Banking Encyclopedia (Volume VI), Sayed el-Hawary casts light on other aspects of business in Islamic institutions. For instance, sell-andbuy- back scheme, where a client sells a property to the bank on condition that he will buy the property back after a certain time at a negotiable price, and mark-up finance, where the bank buys an item for a client who agrees the repay price plus an agreed profit. Interest in modern economics is a compensation for the depreciation of money resulting from inflationary pressures, according to Shawqi. "Interest is an economic phenomenon related to banknotes. The purchasing power of printed money slides over time. It is a stabiliser," he said. "Islamic banking adds many tools for investors. They serve economic development too. They are in the same boat with commercial banks," he added. In the 1970s, Islamic banking gained momentum when four institutions were created: the Islamic Development Bank, as intergovernmental bank, the Dubai Islamic Bank, the first private interest-free bank, Faisal Islamic Bank in Egypt and the Kuwait Finance House. Globally, the assets of Islamic banks have grown at double-digit rates for a decade, and some conventional banks have opened Islamic windows, with Shariahcompliant financial assets reaching an estimated $509 billion at the end of 2007, according to a report titled "Islamic Banking: How Has it Diffused?" by International Monetary Fund researchers Patrick Imam and Kangni Kpodar. The International Organisation of Securities Commissions forecast that around half of the savings of the world's estimated 1.2-1.6 billion Muslims will be in Islamic financial institutions by 2015, according to the report. The Islamic finance industry jumped by a compound annual growth rate for 2006-2009 of 28 per cent, with assets forecast to hit $1.033 trillion by the end of 2010, according to HSBC.
