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Exorbitant income and money laundering
Speaking in a get-together with Wonga leader Errol Damelin, Canterbury Archbishop Justin Welby said the Church of England plans to extend cooperative banks as an option to the disputed suppliers of day loans. The same topic was recently made known to supporters when Newcastle United footballer Papiss Cisse declined to carry a top with the Wonga sponsor's emblem, saying that, as a Muslim, he was unwilling to advertise a money lender.
Attention is focused on the morale of the pay-day loan companies. What do the religions say about money lend and interest? Generally speaking, profiteering, defined as the allocation of money at high interest rates, is disapproved of by religions. A number of Old Testament paragraphs denounce extortion, especially in granting loans to the impoverished.
As a result, borrowing money at interest was banned in the Hebrew congregation, Dr. Alastair McIntosh of the Centre for Human Ecology explains: "Traditionally, it was prohibited to charge interest within the congregation, but it was allowed to outside parties. "In this way, according to Dr. McIntosh, Jews became known as donors, a fact that worsened in mediaeval Europe, where Jews were persecuted for killing Jesus Christ, and as a result of this prosecution they had to be mobil.
"They were good enough to deal in a resource like bullion and thus borrow money, because when they came under pursuit, they could move easily," says Dr. McIntosh. Orthodox traditions are based on the Old Testament's temporary order against the giving of money, and a section in the Gospels (Luke 6:34-35) tells Jesus that those who give should not be expecting anything in exchange.
According to Dr. McIntosh, this was understood by the mediaeval Roman Catholic Church to mean that profiteering among Christians should be prohibited. "Since Christianity has expanded the perspective of the Peoples of God to the whole of humanity, it hasn' t only implied borrowing a point not only within your fellowship, but also not at any price, at any price," he states.
However, in the sixteenth century, with the Protestant Reformation, the Protestant preacher and Protestant professor John Calvin suggested a re-interpretation of the Old Testament disposition of money allocation, clarifying that there should be a differentiation between exorbitant interest charges and low interest money. "Here you have the origins of the Schweizer Bankensektor," says Dr. McIntosh.
"He added that ecology was established in Protests that permitted what the Catholic Church had previously prohibited. Islam, on the other side, does not distinguish between the collection of interest and profiteering and is very firmly opposed to demanding even the cheapest interest rate. Ahmed Habib, Sharjah Chair in Islamic Law & Finance at Durham University, explains:
"In Islam, when it comes to giving money although it is permitted, it is not promoted. "Therefore, credit should be interest-free, but incurring debts is not encouraged," he added. Severe bans on interest collection have led to the creation of Muslim banking institutions that are open to all and offer a range of banking products in line with Sharia standards.
"On a very wide scale," says Prof. Ahmed, "what this would mean is that Islam bank is ethically oriented because scientists believe that Sharia is ethically oriented by nature - it is for the good of people. "This means for banks in practice that they would not be interest rate driven, because that would not make them Sharia compliant," he says.
Islam banking is based on the use of agreements that are permissible under Sharia legislation, such as purchase agreements, lease agreements or partnerships. For example, if you wanted to buy a vehicle, an Muslim lender would not loan you money, but they would take the specification of the vehicle, buy it and give it to the customer for an extra charge and make a profit. What you would get is a good price.
"Even though the profitability of this deal is similar, the decisive factor is that the purchase agreement is permissible," says Prof. Ahmed. Wherever we speak about Muslim finances, we speak about financings that are tightly tied to an investment. The combination of funding and property, as distinct from "virtual" money, differentiates Islam bank from traditional funding.
What would the present finance environment look like, then, if attitudes towards money and interest rates were to shift towards the Muslim paradigm? Professor Ahmed considers it one of the main difficulties of the present system that many finance instruments have nothing to do with the actual economy:
"Looking at the current economic downturn, there were a number of tools, in particular derivatives, that were mainly used to hedge prices. "As for the particular tools causing the subprime meltdown, I think the two most important ones were the mortgage-backed bonds and the swappers.
However, according to Muslim legislation, none of them is permissible," he says. It' s difficult to say what could have been, but according to Prof. Ahmed, the recent economic meltdown has shown that there are some moral problems: "The same goes for Muslim bankers, not just traditional ones. And I think it's necessary to reintroduce the ethic into banking."