Book Review - The history and future of Islamic finance
Heaven's Bankers by Harris Irfan
Even those who assume to know something about sharia - Islamic law - are reticent to make claims about Islamic finance, so complex is this area of law. So when the phrase "sharia-compliant" first emerged in Western financial sectors in the early nineties, it was seen as little more than an ethical-religious system on the fringes of mainstream markets with one main message: the prohibition on charging interest.
Yet today Islamic finance is a trillion-dollar industry with many financial institutions, corporations and governments keen to embrace it as a profit-making alternative to mainstream financial dealings.
Harris Irfan is an insider on two fronts. He is a Muslim and also an expert in finance and commerce. He has worked as an investment banker in Europe and the Middle East and been head of Islamic finance at Barclays; he also founded Cordoba Capital, an Islamic finance advisory firm.
Mr Irfan is a man with a mission: to show that Islamic finance might be able to make a real contribution to our economic woes. He asks the reader to consider whether the Islamic world can "bring something of benefit to the Western world, and vice versa".
This is no mean task, but Mr Irfan uses his own professional and personal experiences to weave together an accessible and interesting story.
We get an insight into the birth of the Islamic finance system in the fifties, to the establishment of the first Muslim banks in Saudi Arabia and the Gulf States and the gradual recognition by Western banks of the enormous profit potential in structuring products on a sharia-compliant basis.
Traditional clerics were flattered with the attention and remuneration offered by the giants of the banking industry in exchange for their expertise.
While this book isn't full of jargon, it helps to know something about how the investment industry works. You also need to have some sense of Islamic history and religious concepts. But the religious commentary does not overcomplicate the narrative. Anecdotes about the life of the eighth-century Muslim legal scholar Abu Hanifa, the financial workings of the Ottoman Empire and the modern controversial Pakistani scholar Taqi Usmani all add weight.
The last chapter ponders the future of Islamic banking after some sharia-compliant finances were unfairly equated with funding terrorism, Worth reading.