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Why non-Muslims are converting to sharia finance
- peapicker 8y agoVery interesting but need a non-paywalled source.
- tareqak 8y agoI was able to click and see the article, and I'm not a subscriber.
- 2muchcoffeeman 8y agoI’ve reached the limit too. What does modern banking have to do with religion?
- lmilcin 8y agoI've reached mine, too. From what I understand you can't lend with interest and you can't lend what you don't own (https://en.wikipedia.org/wiki/Islamic_banking_and_finance https://en.wikipedia.org/wiki/Islamic_banking_and_finance).
- my_username_is_ 8y agoThe article says that Muslim financing tradition prevents banks from paying interest, and they must instead share their profits. In recent years this has been higher than the meager interest offered by banks' traditional savings accounts, so it is attracting non-Muslims at a growing rate. There is some debate as to whether all of these products technically fit the definition/custom--as some banks are advertising a certain rate of return through profit sharing, making it very similar to interest.
- TheSpiceIsLife 8y agoWould it make sense for a retail customer of Big Bank Co. to also be a shareholder thus enabling them to share the profits?
- grenoire 8y agohttps://outline.com/AzjFEa https://outline.com/AzjFEa
- beerlord 8y agoReload in incognito mode.
- jwilk 8y agohttps://web.archive.org/web/20180923141136/https://www.economist.com/the-economist-explains/2013/09/04/why-are-the-economists-writers-anonymous https://web.archive.org/web/20180923141136/https://www.econo...
- dang 8y agoIf there's a workaround, it's ok. Users usually post workarounds in the thread. This is in the FAQ at https://news.ycombinator.com/newsfaq.html https://news.ycombinator.com/newsfaq.html and there's more explanation here: https://news.ycombinator.com/item?id=10178989 https://news.ycombinator.com/item?id=10178989 https://hn.algolia.com/?sort=byDate&dateRange=all&type=comment&storyText=false&prefix&page=0&query=by:dang%20paywall https://hn.algolia.com/?sort=byDate&dateRange=all&type=comme...
- blijf 8y agoHow is this on Hacker News?
- tareqak 8y agohttps://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html On-Topic: Anything that good hackers would find interesting. That includes more than hacking and startups. If you had to reduce it to a sentence, the answer might be: anything that gratifies one's intellectual curiosity
- mmjaa 8y agoIts quite interesting. I'm a hacker, and I'd really rather not invest my money in things I find morally objectionable, such as arms and tobacco. So this is indeed a great article.
- Dylan16807 8y ago"anything that's interesting" was already mentioned, but even ignoring that I don't understand your question. The article is about businesses following certain rules that have to act in interesting ways, and how that plays out with financing. That's right at the core of HN!
- my_username_is_ 8y agoVery interesting--I had never heard of this before. It seems the higher interest rate is predicated on finding investors who want to take loans at higher-than-market-clearing rates. Does anyone have any insight into why non-Muslims are getting loans through these banks? I don't see how this scales to consistently provide higher returns, especially as more money moves into this system. Are tobacco and alcohol related loans failing at a higher rate than the rest of the market?
- lmm 8y agoI would expect a sharia bank to provide market-beating returns to investors because it can charge above-market mortgage rates to borrowers who have no alternative. From the article: > Al Rayan’s home purchase plan (its sharia-compliant version of a mortgage) charges 4.24% in the first two years, almost double the market average. Even so, 12% of Al Rayan’s home-purchase customers are non-Muslims. I'm as stumped as you are regarding that 12% number though.
- toast0 8y agoPaying a little more makes sense for religious or preference reasons , but paying twice the rate (when it's significant) doesn't make a lot of sense for a preference. It seems likely that there is something wrong with the comparison , either the effective rate is computed incorrectly, or there's a significsnt difference in terms or underwriting.
- tareqak 8y agoMaybe some non-Muslims don't want their money to go into arms, alcohol and tobacco? The Economist also forgot to mention gambling too. Edit: there -> their
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- tareqak 8y agoI recognized person mentioned at the end of the article: Tarek El Diwany (same first name as me spelled differently) had a part in the "Four Horsemen" documentary (https://youtu.be/5fbvquHSPJU?t=3479 https://youtu.be/5fbvquHSPJU?t=3479). I found an article about him in https://meic.cfainstitute.org/2012/03/21/islamic-finance-tarek-el-diwany-on-the-problem-with-interest/ https://meic.cfainstitute.org/2012/03/21/islamic-finance-tar... .
- stef25 8y agoThe hypothesis that the war on terror (pointless as it may be) is actually driven by Western banks and the concept of intrest and that the solution lies in sharia banking laws is quite something to get your head around.
- tareqak 8y agoEl Diwany isn't saying that the solution is sharia banking in that part of the "Four Horsemen". Instead, he is rightfully calling out that there is a mismatch between public intentions and the actual incentives.
- ataturk 8y agoIt's driven by the intelligence agencies and large corporations looking to make billions off of pain, suffering and destruction. It's the same as it has always been! It's just another imperial disaster that human history is replete with.
- comesee 8y agoWho wrote this article?
- tareqak 8y agoI don't see an author mentioned.
- jpatokal 8y agoBy long-standing tradition, the Economist's articles have no byline.
- raverbashing 8y agoSounds like a PR piece
- TomMarius 8y agoThe Economist would surely mark a PR piece https://www.economist.com/the-economist-explains/2013/09/04/why-are-the-economists-writers-anonymous https://www.economist.com/the-economist-explains/2013/09/04/...
- coldtea 8y agoThen a real good paying PR piece -- the kind that's passed as an actual article.
- tareqak 8y agoCould you please identify the PR for me? I'm genuinely intrigued: all I see is an observation that different kind of bank has an audience outside of its intended audience, an explanation of how it operates differently, and criticism that it is not as different as it makes itself out to be.
- comesee 8y agoBy PR he means advertising. This article functions as advertising for Sharia banks.
- mmjaa 8y agoThis is great. I'm not a Muslim, but learning that there are banks that don't invest in arms and tobacco - this is great news, and I guess I'll take a closer look at halal banking soon. For too long I've been bothered by the fact that I don't have much say in where my funds are invested by the 'normal banks' - the fact that there is an option for those of us who don't want to participate in the military-industrial-pharmaceutical complex, is indeed great news.
- TheSpiceIsLife 8y agoHopefully, like high protein yogurt and paleo brownies, this will catch on and the larger institutions will offer options to their retail customers.
- codeulike 8y agoBut it doesn't really make sense unless its organisation-wide
- TheSpiceIsLife 8y agoWhy is that? If I take all my money to an ethical (for whatever definition of ethical) institution, or I nominate an ethical profile with my current institution, the same amount of money is doing the same thing, no?
- codeulike 8y agoSee also Ethical Banking, here's a list of regular banks in the USA who dont lend to certain industries: https://www.nerdwallet.com/blog/banking/socially-responsible-banks/ https://www.nerdwallet.com/blog/banking/socially-responsible... Maybe its not a very big thing in the USA. Ethical Banking is pretty big in the UK.
- tialaramex 8y agoBig enough that, for example, the Money Saving Expert site, a popular independent comparison site for savings accounts and similar products, has a separate category if you decide you only want good savings IF they are with an ethical bank. e.g. You can get about 1.5% interest by choosing the best rates (whereas many popular banks offer 0.1% or lower) but the ethical option is 1.35% from Yorkshire Building Society (which is a mutual so your money is being spent buying houses for people and both you & they share the profits from operations). Lots of people will decide that actually not supporting dubious industries is worth 0.15% interest. Not least because the mutuals tend to have fewer aggressive anti-consumer practices, after all the consumers own them so that would be kinda crazy.
- n4r9 8y agoI like the idea of more ethical banks, but I think the article is overselling the popularity of Islamic institutions in the UK. I live in London and whilst I'm aware that Sharia banking exists as a concept, I've never heard of BLME. Also the opening sentence comes off as slightly absurd: >THE HALAL restaurants established by Muslim migrants in Britain quickly inspired an almost religious following among non-believers.
- hjek 8y agoHere in UK, I'm a fan of halal chippies as they always use vegetable oil instead of beef dripping for their chips and patties.
- philliphaydon 8y agoI'm always sad when I see signs with "No Lard No Pork No MSG" it's like all the good stuff taken away.
- gadders 8y agoI just sang that to the tune of "Only Fools and Horses".
- jkaplowitz 8y agoInteresting. Why? Halal definitely allows beef to be combined with potatoes.
- SuoDuanDao 8y agoThe fact that central banks have set the interest rate near zero already must play a role.
- ru999gol 8y agoIt seems if you save money at the bank they will actually loose money for you since their interest rate is lower than inflation. The financial market is such a clusterfuck lmao
- matthewmacleod 8y agoThat’s kind of the point of low interest rates isn’t it? The idea is that this encourages money to move around the economy instead of sitting there accumulating interest.
- programmarchy 8y agoBut with fractional reserve banking, money isn’t just “sitting there” — most of it is being lent out to someone else by the bank.
- rufusroflpunch 8y agoDuring QE, the Federal Reserve bought huge amounts of toxic assets from the big banks, and flooded the banks' accounts with new money, but then paid the banks a higher rate of interest NOT to lend that money out (at least this is my understanding). That's a contributor to the slow "recovery" (which is really just slowly reinflating the credit bubble). The reason they would do this is to prevent high inflation from the massive increase in the monetary base. Effectively, QE just made the big banks balance sheets show "Red == Black" by having the Fed take the red onto itself. So, normally you would be correct about the point of low interest, but in this new world, post-QE, low interest rates are really just there to keep the economy limping along by hiding the massive structural issues, instead of encouraging credit growth. That's why the whole narrative about the Fed heroically saving the economy after 2008 crisis is pretty much nonsense, IMO. The problem still exists and it's worse than ever. Who knows what the next can-kicking solution will be, if there even is one?
- simplysimple 8y agoIf you think they aren't funding terrorism through these banks, I've got a bridge to sell you.
- Radle 8y agoWhat?
- randall 8y agoThat's a pretty big jump.
- tareqak 8y agoThese banks have to follow whatever the UK equivalent of KYC laws and anti-money laundering laws in order to business in the UK.
- dang 8y agoThat's flamebait, which the site guidelines ask you not to post. More generally, could you please stop posting unsubstantive comments to Hacker News? We're trying for better than that here, so eventually ban accounts that do it. On HN the idea is: if you have a substantive point to make, make it thoughtfully; if you don't, please don't comment until you do. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- agumonkey 8y agousury ?
- tareqak 8y agoAre you asking for the definition? Usury (/ˈjuːʒəri/)[1][2] is, as defined today, the practice of making unethical or immoral monetary loans that unfairly enrich the lender. Originally, usury meant interest of any kind. A loan may be considered usurious because of excessive or abusive interest rates or other factors. Historically, in some Christian societies, and in many Islamic societies even today, charging any interest at all would be considered usury. Someone who practices usury can be called a usurer, but a more common term in contemporary English is loan shark. [0] [0] https://en.wikipedia.org/wiki/Usury https://en.wikipedia.org/wiki/Usury
- frogeg 8y agoThey are Muslim banks, not Jewish banks. I suppose that is exactly the difference.
- agumonkey 8y agostill the idea behind may be just that
- nextweek2 8y agoThe title and article are using reglion as a context when it's not. As a consumer I am not converting to Sharia finance, I have just found a product which meets my requirements. The index fund I am invested in turns out to be mainly high tech stocks with a low fee, just because it has 'Islamic' in the fund name doesn't mean I'm a convert to the religious philosophy.
- akerl_ 8y agoWould you still be concerned if the title said "Why non-Muslims are converting to financial institutions which abide by sharia law"? They're a publication; the job of all headline is to convince people to read articles, and on the "clickbait" scale, this seems to be pretty solidly "not clickbait".
- ataturk 8y agoMind you we have been living under Jewish finance for generations and that hasn't been going that well! Usury was a sin in the Catholic Church, iirc. Which religion has stable, gold backed money and low taxes? I'd like to join that one. I was going to find out if the Lakota tribe would adopt me and allow me to live with them as part of a peaceful, sovereign nation within North America. Also, the Amish are definitely on to something with how they live mostly outside of the corrupt, warmongering, inflationary system the US has. I will say for the record that bankers being bankers, I doubt very much any type of financing will really ever be any different than any other. There's all these Type A guys out there with one thought in their brains--to shear the sheep as hard and as often as possible.
- dang 8y agoI think it's the Economist being cheeky with the title in their usual way. A bit baity, but maybe not so much that we need to change it.
- hbhakhra 8y agoOut of curiosity, which fund would that be?
- hevi_jos 8y agoIn Spain the Catholic Church created a series of banks for lending to poor people, and investing profit in social causes. I think the concept came from Italy. Those banks were called "Cajas de ahorros". Most people had their money there instead of private Banks. The concept worked very well for something like 200 years. Until politicians changed the law to control the Cajas themselves. After politicians took control,they did things like private lending at 0 interest to their friends and party(they even lent to one of the biggest party 50 Million euro and then totally forgave the debt!!) or putting their almost illiterate friends as counselors. It took only 15 years after that to totally bankrupt all cajas in Spain, and now they are owned by private banks.
- pvaldes 8y ago> totally bankrupt all cajas in Spain and now they are owned by Some cajas, not all. The broken cajas typically 'bribed/rewarded' policitians offering them vacancies in their boards of directors.
- lottin 8y agoThe Catholic Church has always tended to see charging interest as being equivalent to committing the sin of usury and throughout history they've tried to ban it several times. See for instance: https://en.wikipedia.org/wiki/Vix_pervenit#Historical_context https://en.wikipedia.org/wiki/Vix_pervenit#Historical_contex... In practice these prohibitions weren't too effective because people always found loopholes and ways of charging interest without calling it interest.
- Mengkudulangsat 8y agoI had the opportunity to translate technical documents for both conventional and sharia financial products a few years ago, and I find the market fascination of them mind-boggling. These products seemed to incorporate convoluted jargon and concepts which dramatically increased complexity but at the same time, produced no extra utility for end-users. On top of that, the addition of ongoing shariah-compliance introduced a level of uncertainty that was simply not there in conventional finance. If the building you constructed ended up being used as a cinema, then the shariah debt you used to finance that building needs to either be restructured or unraveled. Why on board such a risk? Even as a muslim myself, I feel like sharia finance is a step backwards.
- superhuzza 8y agoComplexity is a feature in modern financial products. It creates a larger knowledge gap between those selling the products and those buying them.
- barrow-rider 8y ago+1 People forget that the "invisible hand of the market" assumes perfect or at least reasonably accurate understanding of the risks, benefits, and outcomes. Take that info away and you inevitably have snake-oil salesmen and the Housing Bubble (a product of modern financial products) See also: "Externalities in Economies with Imperfect Information and Incomplete Markets" by Stiglitz
- candiodari 8y agoI must say I once read a prospectus for a sharia financed product. No "interest", only "percentual administrative fees". Wait, what ? Other than that, they're essentially "pulling an uber". They're significantly riskier investment schemes that most institutions have had really bad experiences with a few decades ago. They're ignoring regulations that exist for good reason, and regulators seem to let them for some reason (for now). If you want to do that, great. Risky investments are most often the mispriced ones (cheaper then they ought to be). But please, do it yourself, figure out the risks, and don't let some institution do it for you with the promise of cover or ... or you will regret it.
- Proven 8y agoWhat a nonsense title. If I buy a monastery-made wine I ain't converting to nothin.
- k__ 8y agoI once read that "sharia finance" is just a buzzword and those banks are doing business as every other bank, just with different naming of their processes/products.
- SpikeDad 8y agoWhat's next - Feng Shui financing. Making sure all the corporate buildings of the companies you invest in point in the proper orientation?