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The Future of Islamic Banks
A number of professors of economics at Al-Azhar University in Egypt recently discussed the problems and the future of Islamic banks. They were asked if they thought that the war in Afghanistan was a precursor to striking at the Islamic banks by freezing their assets because the amounts earmarked for "zakat" (Islamic charity) were actually diverted to finance terrorism. The following is a summary of their answers.
Dr. Muhammad Abdul-Halim Omar, Professor of Islamic Economics, said Islamic banks are "firmly rooted, strong and solid." The first Islamic bank, Dubai Islamic Bank, was launched in 1975 and since then Islamic banks have increased to 200 across the Muslim and Arab countries, transacting business at $400 billion annually. The growth of these banks in numbers and size is proof of their success. In addition, these banks provide a measure of security equal to that provided by any other bank. The Islamic banks are part of the banking systems in the countries in which they operate and are subject to the same rules and regulation. "No evidence has been uncovered," insists Dr. Omar, that these banks have been engaged in terrorist financing orin money laundering.
While Dr. Omar doubts that the U.S. intends to strike at the Islamic banks [by freezing their assets in the West] he nevertheless asserts that "America plans to strike at Islam and all its institutions, and it is conceivable that it will strike at Islamic banks… by preventing their correspondent banks [in the West] from dealing with them." [In fact, this is the primary concern of the Lebanese banks because of their government s refusal to freeze the accounts of Hizbullah. See item on Lebanon below].
Omar expresses another concern, stating the war on terrorism costs the U.S. an enormous amount of money and "what better way is there for the U.S. than to confiscate frozen accounts to finance its own war."
Dr. Hassan Shihata, another Professor of Islamic Economics, discounts any measures against Islamic banks by the U.S.because many of them have branches there and its expenditures on "zakat" are well documented. He mentions "Bank Faisal"which keeps the saving accounts of "all leading Arab personalities" and no one should suspect a bank of this stature to finance terrorism. However, he says, it is conceivable that "the war of the jungle" will prevail, and the world will no longer be a world of laws and rules [in the event the U.S. confiscates the assets of Islamic banks in the West].
Dr. Ahmad Tamam, another Professor of Islamic Economics, takes the opportunity to warn Muslims to eschew European and American banks because their assets are subject "any day to confiscation or freezing." This could be "a great calamity…Weask Allah Almighty to save us from its consequences."
Looking into the future, Dr. Muhammad Ali Al-Jarji, Director of the Islamic Institute for Research and Training in Saudi Arabia offers a number of counter-measures "to confront any American virus" that could inflict Islamic institutions. This calls for the establishment of pan-Islamic banking institutions with proper planning and programming and vitalizing the stock exchanges to attract capital. Source: Lailatalqadr.com, November 26, 2001.
Limited Arab Deposits Overseas Are Repatriated
Notwithstanding alarmist statements by some economic analysts about the danger of confiscation of Arab assets overseas, few Arab investors "are thinking of repatriating their deposits of $800 billion overseas." However, one Saudi analyst estimates the repatriated capital to Saudi Arabia at "hundreds of millions of dollars." The Saudis, who own the lion s share of Arab deposits overseas, have sustained losses estimated at $40 billion since September 11, mainly in the stock exchange.
At a conference on "investments in informatics" held recently in Dubai a number of participants suggested that the events on September 11provided a golden opportunity for Arab countries to invest their bank deposits in large, local projects. A more realistic opinion was expresses by Ra afat Radhwan, head of the informatics department in the Egyptian prime minister s office who pointed out that "investment recognizes neither nationality nor borders but only the rate of return." Total Arab investments in Arab countries in 2000 amounted to $3.2 billion with the biggest shares going to three countries—Tunisia, $700 million; Lebanon, $350million; and Sudan, $330 million.
[Al Azhar economics professors and other commentators and analysts, including those quoted above, seem to overestimate the absorptive capacity and the investment opportunities of their markets. The World Bank, with fifty years of experience and a highly trained technical staff, finds it difficult to identify investment opportunities in excess of $20-25 billion annually in developing countries all over the world. Moreover, even if rich investment opportunities were to be found for Arab capital deposited overseas, it is doubtful that Arab investors, many occupying high-level government positions, would chose to sacrifice the safety of the West for the political volatility in their own countries.
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