Vatican Says Islamic Finance May Help Western Banks in Crisis

[TAS]

March 4 (Bloomberg) -- The Vatican said banks should look at the rules of Islamic finance to restore confidence amongst their clients at a time of global economic crisis.

“The ethical principles on which Islamic finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service,” the Vatican’s official newspaper Osservatore Romano said in an article in its latest issue late yesterday.

Author Loretta Napoleoni and Abaxbank Spa fixed income strategist, Claudia Segre, say in the article that “Western banks could use tools such as the Islamic bonds, known as sukuk, as collateral”. Sukuk may be used to fund the “‘car industry or the next Olympic Games in London,” they say.

Pope Benedict XVI in an Oct. 7 speech reflected on crashing financial markets saying that “money vanishes, it is nothing” and concluded that “the only solid reality is the word of God.” The Vatican has been paying attention to the global financial meltdown and ran articles in its official newspaper that criticize the free-market model for having “grown too much and badly in the past two decades.”

The Osservatore’s editor, Giovanni Maria Vian, said that “the great religions have always had a common attention to the human dimension of the economy,” Corriere della Sera reported today.

Bloomberg.com: Italy

 

[Neser Boha]

Interesting, I just actually read something about Islamic banking... I heard they have no interest... but I guess those are not the 'rules' the article's talking about. I think it would be worth for the West to look into that. Thank for the article, TAS

 

[editec]

That's right.

Usary is a sin in Islam, just as it once was in Chistendom.

Now our entire economy is based on usary.

How's it working out for us?

Well the most prouctive economy in the world and most of its inhabitants are in debt to somebody or the other.

And since those somebodies claim to all be broke, our economy is grinding to a halt.

Great system this one. I am extrmely impressed.

 

[TAS]

Interesting, I just actually read something about Islamic banking... I heard they have no interest... but I guess those are not the 'rules' the article's talking about. I think it would be worth for the West to look into that. Thank for the article, TAS

You are welcome Neser Boha
Islamic finance is based on the prohibition of usury or interest. it is based on being a partner and investor in a business rather than being a lender to it. That's not all. It also have guidelines on which investments to invest in and which not to based on what Islam allows or forbids. For example, it's ok to invest in consumer goods but not in hotels that have gambling casinos or nightclubs. It's socially responsible investing.

 

[editec]

In theory, non-usary banking is really more like becoming a partner with businesses.

How that helps people find money to buy homes and so forth, I do not know.

I have no idea if their system is superior, but I'm pretty damned sure what we have is toxic to civil society.

I still think that the GOVERNMENTS themselves ought to be in the banking business.

That will mean that a nation is funding it's own citizens' business investments and home purchases, and so forth.

Private banks can cohabit that system but our government should not fund them, protect them with things like FDIC, or allow them to lend more money than they actually have, either.

That means if some private bank lends you money, they took it out of their own capital which they actually have, and they hold the paper on that loan.

 

[TAS]

In theory, non-usary banking is really more like becoming a partner with businesses.

How that helps people find money to buy homes and so forth, I do not know.

I have no idea if their system is superior, but I'm pretty damned sure what we have is toxic to civil society.

I still think that the GOVERNMENTS themselves ought to be in the banking business.

That will mean that a nation is funding it's own citizens' business investments and home purchases, and so forth.

Private banks can cohabit that system but our government should not fund them, protect them with things like FDIC, or allow them to lend more money than they actually have, either.

That means if some private bank lends you money, they took it out of their own capital which they actually have, and they hold the paper on that loan.

Hi editec
I found those articles which explains how Islamic banking provide an alternative to traditional mortgages.
John Esposito: Banking without Interest: Islamic Home Mortgages - On Faith at washingtonpost.com
Islamic Bank Of Britain Unveil Shariah Mortgage Alternative
Mortgage Solutions - Islamic Bank unveils range of ‘mortgage alternatives’

 

[auditor0007]

These are interesting concepts. However, in the end, the Islamic banks still make money. Instead of charging interest, the person buying a house will pay back in installments a price greater than the original price of the house before he owns it outright. I would assume that if the purchaser is no longer able to make the payments, then the bank takes the house away.

In the end, the purchaser is still paying interest; they just don't call it that.

In the first part it states that some Muslims believe charging interest is okay, so long as it is within reason. This would make sense. For instance, the rates charged on credit cards would be considered beyond what is necessary, so they would charge much less interest, but would also likely reduce the amount of credit available, which for most would probably be a good thing.

 

[mash107]

In theory, non-usary banking is really more like becoming a partner with businesses.

How that helps people find money to buy homes and so forth, I do not know.

I have no idea if their system is superior, but I'm pretty damned sure what we have is toxic to civil society.

I still think that the GOVERNMENTS themselves ought to be in the banking business.

That will mean that a nation is funding it's own citizens' business investments and home purchases, and so forth.

Private banks can cohabit that system but our government should not fund them, protect them with things like FDIC, or allow them to lend more money than they actually have, either.

That means if some private bank lends you money, they took it out of their own capital which they actually have, and they hold the paper on that loan.

governments running banks haven't been working out well for us, it seems.

it's definite that U.S. banking was a lot more stable before 1913.

and yes, fractional-reserve banking and lending is fraudulent and should be a crime, instead of supported by the government.

 

[cbi0090]

Well, it may seem that the Islamic banks make money but it's pretty hard to tell when the inflow of cash is pretty endless and transparency is non-existent. There is also the problem with the fact that their banks are owned and controlled by a very small number of people who are passing it out as they see fit. I hate to say it, but it appears the Pope doesn't have any idea about what he is talking about.