Dollars, Cents and Shari’ah
Stuff you just might not know.
Islamic-Safe Finance Grows in the West
When Caribou Coffee went public last year, sharp-eyed investors noticed some unusual promises in its prospectus. Caribou, the nation’s second-largest coffeehouse chain, said it would never sell pork or porn. It wouldn’t charge or receive interest, either.
By following financial rules that are part of the Islamic code called Shariah, Caribou is among a small but growing list of Western businesses looking to make themselves as attractive as possible to Muslim investors. Some, like Caribou, are motivated by principle, while others see Muslim investors as an attractive new source of money.
…Dow Jones has created an Islamic investing index. A Texas company issued almost $166 million in Shariah-compliant bonds to finance natural gas operations in the Gulf of Mexico. And the German state of Saxony-Anhalt issued a floating-rate 100-million euro note — managed by Citigroup — that followed Shariah rules.
Assets invested at two Shariah-compliant funds run by Saturna Capital in Bellingham, Wash. have swelled nearly 10-fold, since 2002 from $34 million in 2002 to $331 million now — though that’s still tiny by mutual fund standards. The funds invest only in companies that are Shariah-compliant.
…Eric Meyer, who runs a Connecticut-based hedge fund called Shariah Capital, says Western banks and financial institutions need to have Shariah-compliant products or risk losing market share.
“There is a younger generation of Muslims who grew up during the last 20 to 30 years that have a reawakened sense of nationalism and religious pride that motivates them to invest according to their faith,” he said.
But in Western finance, it takes some creativity to avoid earning or paying interest.
To borrow money, Shariah-compliant companies often pledge the lender a share of the profits from an asset instead of interest. Investors who need to earn a shorter-term return can contract to buy, say, $100 of copper today, and simultaneously pledge to sell copper in 90 days for, say, $103.
Caribou Coffee Company Inc., for instance, has a revolving line of credit. But instead of paying interest, it sells assets and then pays to lease them back.
Harry Reid should work for them.
It’s a frickin’ amazing shell game. Subterfuge and sleight of hand, all in the name of religion. I would imagine it’s also remarkably hard to keep track of assets and cash flow, since one doesn’t actually own anything ~ Ali bin Bomber says “What funds? I own nothing.” Acbar ack ShneikAtac says “And I sent him nothing.”
I’m gonna give that a whirl April 15th.
A primer.
World Stuff | tree hugging sister | 
October 12, 2006 3:16 pm
Subscribe
In reality, it isn’t much different from the “eruvs” that Orthodox Jews want to put up in their neighborhoods to “symbolically” expand the size of their homes so as to permit activity that would otherwise be forbidden.
If there was ever an area in which you should follow the spirit of the law, you would think it would be religious law. If I’m wrong about things, the one good part will be waiting on line behind someone who is trying to weasel their way out of a trip to hell by claiming they were following the letter of the law.
Well, as far as I read it it’s not really a shell game: it’s just overly and needlessly complicated compared to simple interest-based debt financing. But asset leverage, equity financing and most of all short-selling are hardly unique to Islam: they happen all the time for non-religious reasons.
But the ‘all the timers’ do it freely for economic gain, Dave. They DON’T do it so as not to make a “profit” while circumventing the strictures of their religion, which CLEARLY tells them not to.
If there was ever an area in which you should follow the spirit of the law, you would think it would be religious law.
I’m with Bill here and think that pretty much qualifies as subterfuge and shell game. It’s also a pretty striking contrast when you juxtapose their financial minuets against how directly they’d be off to kill you if you quoted the Pope and someone said “sic ’em”.