If It Walks Like a Duck.....

Last night I had dinner with a friend who for his sins is an advisor to banks in the Middle East helping them devise Islamic Banking Products.

For those of you who don't know, under Islamic or Sharia Law the payment of interest is not allowed. That is not so surprising given that in the Old Testament there were prohibitions on charging interest-except to strangers-and at the end of seven years all debts were remitted except, again, to strangers.

In the early history of the Christian Church Christians were prohibited from indulging in interest. Jews, not being Christians were allowed to fill this role, and as the Torah didn't forbid charging interest to "strangers" it all fit together. Eventually this prohibition was removed from Christians as there developed a separation of church dogma and economic realities. The prohibition on interest was first removed from commercial ventures-the emergence of venture capital-and eventually even from interest on money although usury was forbidden.

The prohibition on interest remains in Islam and the solution to the problem would raise an eyebrow of respect from the best Talmudic scholars. Interest is forbidden; but profit is allowed. So essentially all Islamic Banking products are focused on how to turn interest into profit. And the simplest way to do that? Call it profit.

In the middle of a recent negotiation which went on for weeks my friend got somewhat exasperated and got up from the meeting and went outside to cool down. One of the Sharia scholars followed him to try and help calm him. In the ensuing discussion my friend asked the Sharia expert if he thought God was omnipotent. "Yes" the scholar answered. "So wouldn't God be able to see through this ruse to circumvent the payment of interest?" continued my friend.

The scholar reflected for a moment and said, "but Jews and Christians have the same restrictions and the same God so how can you criticise us?"

Maybe because two wrongs don't make right, but more likely because we live in a secular society. And by the way we still haven't come up with a rational definition of usury.