How to be Islamic in business
Ensuring that financiers comply with sharia is becoming big business
THERE are many ways to get rich in a boom town like Dubai—investing in property is the most obvious—but nowadays one of the most lucrative jobs in the Gulf's financial hub is that of sharia scholar. This Muslim legal expert gives fatwas, the final Islamic seal of approval, to financial instruments he deems “sharia-compliant” at a time when investment by Muslims (especially from the oil-rich Arabian peninsular) in global financial markets is soaring. Pious Muslims equate the charging of interest to usury, which is forbidden; they also shun investment in such areas as gambling, tobacco, drink and the arms trade.
Step forward Hussein Hamid Hassan, a 75-year-old Dubai resident, now probably the world's biggest figure in fatwas for Islamic finance. After an impoverished boyhood in an Egyptian village to degrees at New York University and al-Azhar in Cairo, he has gone on to advise the governments of Egypt, Kazakhstan, Kuwait, Libya and Pakistan on Islamic law. He chairs the sharia boards of at least 15 Islamic banks and financial institutions. His knowledge of common law and economics, as well as English and French, has helped. Above all, Mr Hassan is a pioneer and an innovator, working out new financial structures and helping to convert conventional banks to sharia-compliance. “I submit that in a few years all the Gulf states will move to an Islamic financial system,” he says.
Mr Hassan's star has risen because Islamic financial institutions and the growing number of conventional banks getting into the game all now need a reputable sharia board to attract Muslim investors who, since September 11th, have moved away from conventional banking just when the oil boom has left them awash in cash. New financial instruments are proliferating, from fee-based Islamic credit cards to Islamic mortgages, whereby the bank buys the property, then sells it at a mark-up to the client through an instalment plan. (The Saudi banking system, it may be noted, is largely interest-based; some contest the whole notion of “Islamic finance” as a mere sleight of hand, with interest payments called “profit sharing” and interest charges “handling fees”.)
The most significant of the new instruments is the Islamic bond, known in Arabic as a sukuk. In 2006 Dubai Ports World issued one to pay for its controversial purchase of P&O, a British-owned ports operator. Another sukuk was issued to help finance Nakheel, the Dubai-owned development company behind the man-made island projects off the shore of its home town. Both surpassed the $3 billion mark, breaking world records; and both shocked global markets by attracting a majority of investors from outside the Middle East. Both were approved by Mr Hassan.
Not just Muslims are taking notice. A Texas oil-and-gas firm issued the first American sukuk last year. “Islamic finance is becoming international,” says Mr Hassan.