Dinah Lord

There is no recession in Jihad.

Rachel Ehrenfeld manages to both enlighten and depress us with her excellent article:  Recession in Terrorism Finance.

The economic downturn and instability of the financial markets in the West has battered global economies. Despite the accompanying drop in oil prices, the current financial crisis has actually presented opportunities to expedite the influence and extend the global reach of Islamism in ways Sunni imams and Shiite mullahs could have only fantasized about before.

Read it all.

Sharia finance: It ain't all that.

Remember Aston Martin's much ballyhooed Sharia compliant LBO back in April 2007?

Crash and burn!  And guess who's getting screwed?  The creditors.  (The next time someone tells you that Sharia finance is safer and more ethical?  Laugh in their face.)

Default by Aston Martin owner tests Islamic finance.

Kuwait’s Investment Dar, the Islamic finance holding company which owns a majority stake in British luxury carmaker Aston Martin, has suspended payments on its KD1bn ($3.5bn) debt. Its strategy of relying on short-term financing was crippled by the credit crunch. Sharia law provides no precedent for what happens next.

Islamic finance is a recent phenomenon. The aim was to create products that work exactly like Western debt instruments, but without actually making “interest payments”, which is prohibited under some interpretations of sharia law. So, broadly speaking, the lender is called an investor and interest payments are renamed profits. The new terminology hasn’t had any practical effect up to now, as there haven’t been any major Islamic finance defaults.

More from the Grand Mufti: Invest in Sharia!

Not so fast there Mufti Man.

Saudi Arabia's grand cleric on Sunday told Muslims on the hajj pilgrimage that the global financial crisis stems from ignoring God's rules and allowing "riba" or usury, prohibited in Islam.

"Today we watch as this financial crisis enfolds and some companies and banks go bankrupt," grand mufti Abdul Aziz al-Sheikh said at the Namera mosque, where prophet Mohammed prayed while making the pilgrimage.

"This is the result of ignoring God's rules. Muslims must abide by God's rules, and build their economies accordingly," Sheikh told the faithful before midday prayers.

I guess the Mufti hasn't gotten the memo  yet: Islamic Finance no longer immune to crisis.

Islamic banking can no longer claim immunity from the global financial crisis now that it is hitting the industry's main source of funding and property values in the Gulf Arab region.  The industry escaped the immediate fallout from the crisis as its ban on interest and its lack of structured products prevented it from investing in the assets that turned toxic for conventional banks.

In a report issued last week debt rating agency Moody's said Islamic financial institutions in the Gulf showed strong resilience during the global financial turmoil, but that they are not risk-immune due to a shortage of liquid instruments and the lack of an Islamic interbank market.

The ratings agency expects growth in Islamic banking assets to slow sharply in 2009, to around 10 to 15 percent from a range of 20 to 30 percent this year.

Islamic banks now stand in the same firing line as their non-Islamic counterparts, facing a slump in equities valuations and a slump in Gulf real estate, to which they are heavily exposed.

Sukuk issuance is down 60% from 2007 and the balance sheets of these so-called Islamic Banks are real stanky.  Last week, the UAE had to bailout mortgage lenders Amlak and Tamweel - what do you have to say about that, muf?  With billions of dollars of sukuk obligations coming to maturity over the next 12-18 months and with the shaky legal underpinnings of Islamic mortgages, now the question is - will borrowers be able to repay them?  I predict a sukuk clusterphuk on the horizon...

Here's the thing.  It looks like orders have come down from the head shed and now all the Imams are jumping on the bandwagon and pushing Sharia Finance as the new world order. 

"Communism will be eradicated in fifty years. Capitalism, too. Only Islamic finance will continue," said Dr. Said Al-Awiss, Imam and preacher of the Iskan mosque, in Dammam (east) in the daily Al-Watan.