This is a CNBC World Television interview from DUBAI on Islamic Finance. I TIVO'd it on May 17 2004 and just found it archived on my hard drive. Though dated, it still makes for good viewing.
RIBA is an arabic word meaning "...to add [a burden] to something...."
GHARAR is an arabic word meaning "uncertainty" or "speculation".
The word RIBA has been reduced to mean only "interest". This is incorrect.
There are 70 to 73 different types of RIBA. Interest is just the most understood.
Islam, along with earlier scriptures, forbids RIBA and Encourages Commerce.
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LONDON, ONTARIO, CANADA -- THE adage "you can take a person away from one's village, but you cannot take the village away from the person" is so true about most Zambians who have settled in Canada.
While most have lived away from home for so many years, they have not forgotten the land of their birth. Most support relatives at home in paying for school fees, building houses, living expenses and hospital fees.
This is in the form of remittances. A few have gone on to extend that help beyond relations by forming charities or engaging in charities or projects with a focus on Zambia.
Some individuals have set up on their own while others have teamed up with Canadians to further their causes.
The causes cut across spheres such as agriculture, education, sports, HIV/AIDS, solar power and poverty reduction.
This article is a snapshot about some of those ordinary Zambians who are doing extra-ordinary things.
It is a diverse group in diverse circumstances united by love for the motherland.
GlobalLight Projects is an organisation based in London, Ontario, Canada with a focus on assisting people in the developing world by means of applications of simple technology.
Providing solar-powered lighting, electricity to run electronic equipment and a pump to distribute safe water is a simple but dramatic way to begin to improve lives.
GlobalLight Projects was started recently by five friends who have significant experience in relief and development.
Thomas Chona, who grew up in southern Zambia, is an information technology (IT) professional whose passion for rural communities compelled him to get training in the design and implementation of solar power installations.
Doug Whitelaw worked in leadership development at an international college in Kenya for most of a decade.
Marilyn Crewe and Wayde Foss worked for a number of years with a humanitarian aid agency focused on the former Soviet Union.
Peter Shaw was one of Canada's earliest adopters and advocates for the use of alternate and renewable forms of energy.
GlobalLights' first project is to provide wind and solar power to a school in Choma.
Funds are being raised now for this project.
The first part of the installation is expected to be completed within the next few months.
Following completion of the project, it is anticipated that schools in other rural villages in Zambia, where community leaders are willing, will also receive a solar installation.
Teachers' homes could also be included in the project, where payment for electricity use at a fair rate would then provide funds so that the school installation is sustainable.
Modern equipment, such as computers, could then be added to the schools to enhance the learning environment. Website: www.globallightprojects.org.
Rural Action International is a registered Canadian charity, whose overall objective is to relieve poverty in rural communities of sub-Saharan Africa by providing programmes to ensure people in need can produce or buy sufficient food to support themselves and their families.
As a starting point in Zambia, Rural Action International aims to provide community-based training and services for groups of vulnerable women in the Northern Province using cassava as the key entry point.
This could lead to improved household food security, nutrition and incomes for rural households as well as improved agro business skills for women farmers, and greater participation of women in business-oriented cooperatives and farmers' organisations.
Rural Action International is currently supporting a women's club in Kasama.
Rural Action International was formed through the inspiration of Rodah Namwalizi Lester who described a successful approach to rural development in her book Cassava Is The Root.
It gives first hand descriptions of how to bring grassroots communities together and connect them with non-governmental organisations (NGOs) and government authorities to address the roots of poverty and underdevelopment.
The details on food processing and recipes have also been used by hundreds of women, individually or organised in groups, to add value to their own production and to start income generating businesses.
Senika Warner, based in Ottawa, formed Buya Village Foundation to help reduce poverty byempoweringwomen and children in rural Zambia through life skills training and literacy one village at a time.
The motivation for forming Buya Village Foundation came from the fact that Senika grew up in a village herself and saw the day-to-day challenges of rural life.
Teaching in rural Zambia in places like Mukunashi, Kamakechi, Miombe, and Kasempa awakened her to do something.
She describes her mother as a hero because even though she did not go far in education in her time, she saw its importance for Senika. Senika was in Zambia recently to monitor some of her projects.
Mulenga Michael Sikombe Memorial Foundation is registered as Enanae Foundation in Zambia.
Formed by Torontonian Mabel Mwaba-Opoku, the objective of the foundation is to bring awareness of the plight of children and seniors who are considered the vulnerable in society.
The foundation has a strong team of volunteers in Canada and Zambia.
Note: Chasaya Sichilima is president of the Zambian-Canadian Foundation and is based in London, Ontario, Canada.
LONDON, ENGLAND, UNITED KINGDOM -- LONDON-BASED Gatehouse Bank, the latest Islamic bank to be authorized by the UK’s Financial Services Authority (FSA), has become the first Islamic bank to join Paris Europlace, an organization that promotes Paris as a financial center. Paris Europlace has over the last two years also started to focus on the Islamic finance sector and established an Islamic Finance Commission in December 2007.
Gatehouse Bank will, in fact, participate in the work of this commission which supposedly acts as a focal point for the Islamic financial community in France and whose opinions are listened to by the French government. This commission is akin to the Islamic Finance Committee of the UK Trade and Investment (UKTI), the UK government entity that supports companies trading internationally and overseas enterprises seeking to locate in Britain.
The bank’s membership of Paris Europlace is also a statement of intent about its perception of the French market and opportunities there, including Shariah advisory services, real estate, wealth management, asset management, treasury, capital markets and off balance sheet investments.
Richard Thomas, CEO of Gatehouse Bank, stressed that “Islamic Finance has a bright future in France with its large Muslim population and trade links with many Islamic economies. The support of the French government and championing by Paris Europlace will help the development of a French Islamic financial infrastructure.”
Thomas is under no illusion that passporting Islamic financial services from London into France will be that simple. “We are keeping a close eye on developments in France, although the French have still got a long way to go in achieving their objectives no matter what their PR might say. We have an ambitious French project underway which is ongoing and looking at France as a jurisdiction for Islamic finance to internationalize the reach of Islamic finance as a mode of finance,” he explained in a recent interview.
“This project also tracks and helps with the development of Islamic finance in France, and we would extend that to any mature economy in Europe that is interested to learn from the experience in London. It depends on the ability of the market to open up there. We would keep a commercial interest there as well in the medium term. We have an interest in the infrastructural development of France as a center for Islamic finance in Europe. We also have an interest in France as a destination for investment capital. We are interested in investing in French property,” he added.
Gatehouse Bank has appointed Antoine R. Chemali, associate vice president, to coordinate its French strategy. French banks, funds and private offices, said Chemali, are already showing interest in Islamic capital markets and syndicated financings, institutional wealth management, treasury products, real estate and Shariah advisory services. Gatehouse Bank is already in negotiations with some of them who are interested in the bank’s specialized products concepts such as the first Islamic water fund and London Office Recovery Fund.
“It is fascinating to see the demand for Islamic investment vehicles among both Muslim and non-Muslim investors, as their Shariah compliant principles create a solid foundation for managing risk and acting ethically,” he added.
France, which has an estimated Muslim population of between 8 million to 10 million, is potentially the largest domestic market for Islamic finance in Europe. In recent months, the French government, with the encouragement of President Nicolas Sarkozy, has stepped up the development of its legal and regulatory framework to facilitate Islamic financial transactions in jurisdiction.
In September 2009, for instance, the French National Assembly amended Article 2011 of the French Civil Code relating to the formation of trusts. The amendment is generally regarded as a positive step toward facilitating the origination of Sukuk (Islamic securities) out of France.
France hopes that this amendment, first approved by the Senate in June 2009, will help the Sukuk market take off in France. President Sarkozy earlier this year publicly declared that his government supports the facilitation of Islamic finance products in France under the country’s financial inclusion policy and is keen to make Paris the other Islamic finance hub in Europe.
In April 2009, the French government started to overhaul its tax laws to facilitate Islamic financial transactions such as Sukuk and Murabaha (cost-plus-financing) used primarily in commodity finance. This move has been on the cards since the summer of 2008 when Paris announced that it had started its tax neutrality review to facilitate Islamic financial products.
France is also keen to attract Islamic investment both at home and through joint ventures in third countries.
Note: ...hopefully Female French Islamic Bankers and Islamic Financiers wearing Hijab on the job will remain a non-issue.
Posted by: HiMYSYeD on Friday, October 23, 2009 - 10:37 AM EST (402 Reads)
Global insurers controlling assets worth trillions of US dollars have joined with the world's leading academics in a United Nations-backed survey putting the industry's approach to sustainability and climate risks under forensic examination.
Global insurers controlling assets worth trillions of US dollars have joined with the world's leading academics in a United Nations-backed survey putting the industry's approach to sustainability and climate risks under forensic examination.
Coming just six weeks before the pivotal United Nations climate summit in Copenhagen, Denmark, the report has been welcomed by the UN's environmental head and His Royal Highness (HRH) Prince Charles.
The report highlighting the first-ever such global survey of the powerful insurance sector, and backed by the United Nations Environment Programme (UNEP), says that the industry has a fundamental role to play to speed the transition to a clean, green, low carbon global economy that supports sustainable development and tackles the threat of global warming head on.
The document, launched yesterday at a major UN gathering of financial service companies in Cape Town, South Africa (www.unepfi.org), reveals that senior executives from the powerful sector are convinced that in order to sustain their industry's long-term economic health, they must systematically integrate key environmental, social and governance (ESG) factors into insurance company underwriting guidelines and product development, and other core operations such as investment management, claims management, and sales and marketing.
The report, entitled, "The Global State of Sustainable Insurance: Understanding and integrating environmental, social and governance factors in insurance", summarises the key findings of the UNEP Finance Initiative global survey conducted this year, the nature and scope of which made it the first of its kind ever.
Achim Steiner, UN Under-Secretary-General and UNEP Executive Director, commenting on the report said: "The insurance industry has long been in the vanguard of understanding and managing risk, and has served as an important early warning system for society by amplifying risk signals. Through loss prevention and mitigation, by sharing risks over many shoulders, and as major investors, the insurance industry has protected society, shaped markets and underpinned economic development."
"And the message is loud and clear?insurers are communicating strong risk signals stemming from a wide range of environmental, social and governance issues?from climate change, biodiversity loss and ecosystem degradation and water scarcity, to poverty, emerging manmade health risks, ageing populations, child labour and corruption," he said.
HRH The Prince of Wales, in a foreword to the report, writes: "Insurance companies play a pivotal role in identifying and assessing new and emerging risks. No other sector takes a longer term or more carefully calculated professional view of the future. Their approach to sustainability is therefore of fundamental importance, not only to the rest of the corporate sector, but to the whole of human society. So I am delighted to introduce this timely and comprehensive global sustainability survey of the insurance industry by the UNEP Finance Initiative."
HRH Prince Charles concluded: "Climate change is the global challenge that will define our generation. But it is important not to lose sight of the other sustainability challenges that we face, such as biodiversity loss, water management, rapidly increasing population growth and rapid, unplanned urbanization. In all these and many other areas of human life we need to find more sustainable ways of running our economies. This survey demonstrates that the insurance industry recognizes the importance of these challenges and is developing responses that truly reflect the level of risk."
Note: Now and then, the fact that "sustainable" and "Islamic Financing" are interchangeable resurfaces.
TORONTO, ONTARIO, CANADA --Accounting firms are more than what they seem - Over the past few years there has been growing buzz about Islamic finance in Toronto.
Despite all the optimism, one cannot help but feel that not enough action is taking place. Or at least that is how I felt until I attended an event sponsored by one of the Big Four.
Having learned a great deal about the continual expansion of Islamic finance in Europe, and its growing presence here in Canada, I wanted to know if any real opportunities existed here in Toronto.
Fortunately, I was invited to attend a seminar which was organized by a start-up financing firm specializing in Islamic finance.
I was surprised to learn that the event had been sponsored by PricewaterhouseCoopers.
At the event, the speakers addressed a variety of issues ranging from opportunities in this field and challenges in making it compatible in the existing environment, to future outlooks of the industry.
Many of their concerns surrounded Canadian laws regarding double taxation, but there is no need to delve into that further.
After all the speakers had shared their concerns and visions for the industry, I had the opportunity to mix and mingle with the corporate representative from PwC.
He had been living in Europe for many years prior to coming to Canada.
The question on my mind was why they were sponsoring this particular event, considering that Islamic finance industry in Canada is currently very small and comprised of only a few start-ups.
The answer was simple.
Note: The Answer is simpler than that...
PwC wants a piece of the action to prevent "Islamic Accounting Start-ups" from grabbing ANY share of the local Toronto Islamic Finance scene.
DUBAI, UNITED ARAB EMIRATES -- Islamic finance can provide some suggestions to the G20 countries to consider asset-backed financing, securitisation of real assets, avoidance of excessive leverage and intelligent use of derivatives, said Rushdi Siddiqui, Head of Islamic Finance, Thomson Reuters.
"While the world economy is worth trillions, the Islamic finance industry is approaching the $1 trillion (Dh3.6trn) mark. So it may not yet be a true global heavy weight, but lessons can be shared," he said.
Thomson Reuters has its regional headquarters in Dubai, with 600 staff in 68 countries across the Middle East and Africa. Following are excerpts from the interview with Siddiqui.
Can you tell us how big the Islamic finance market is now?
It depends on who you speak to, with numbers ranging anywhere from $500 billion to $1trn. This high level of variance tends to discredit the industry, which means it has to do a better job in providing accurate data.
How fast is the Islamic finance sector growing currently?
As I said earlier, the number could be between 10 and 25 per cent [again a large variance], and I believe better metrics are necessary for the industry to be successful in the long run. However, the market is clearly growing faster than conventional banking in select Muslim countries that have made a commitment to Islamic finance, such as the UAE, Malaysia, etc.
Has the financial crisis affected Islamic finance in the past six months?
Yes, the collateral impact of the sub-prime-induced credit crisis has impacted confidence and liquidity, but the damage has been less severe than in conventional finance because the principles on which Islamic finance is based are different from that of conventional finance.
Can you elaborate on this?
Yes. Due to the embryonic nature of the industry, it has saved itself from exposure to toxic assets and complicated derivative structured finance. We have yet to hear about Islamic mortgage foreclosures on the same level as conventional mortgages, Islamic bank bailouts at the same level as conventional, no capital injections in the takaful [Islamic insurance] as AIG, etc.
Islamic finance has established its presence in the Middle East and Malaysia. Are there any new markets embracing Islamic finance of late?
Yes, G20 countries such as the UK, Singapore, Hong Kong, and most recently France, have planted the Islamic finance flag in their financial soil. We are even seeing developments in selected parts of Africa. Finally, the Halal industry, which is a brother to Islamic finance, has a presence in Brazil, Australia, New Zealand, all of which are exporters of Halal meat to the GCC.
What is Thomson Reuters currently offering in Islamic finance?
Thomson Reuters offers a platform approach. We want to assist the industry in the growth of Islamic finance because the sector is embryonic in nature, and has been rising to prominence globally on the back of the petro-liquidity spike. But Islamic finance is also fragmented and hence there is much more product pushing versus a holistic approach. The information search costs are very high. There is no global connectivity. There is no 'go to' global platform to execute transactions for all Islamic assets. Thomson Reuters platform is global, well respected and, most important of all, neutral. We will reduce the high information search costs, add global connectivity and allow for the execution of transactions.
Which audiences will you be targeting at Thomson Reuters?
As a global company with global clients, we expect to address the needs of all those interested in Islamic finance on the information side, connectivity side and execution of trade side, no matter where they're located.
What role do you see Islamic finance playing on a global scale in the next five to 10 years?
I see the industry as a sunrise. This crisis has raised the profile of Islamic finance, demonstrating that future investment will be about asset-backed financing, the prohibition against excessive leverage and prohibition against speculative derivative products. Investment will be more about civil engineering than financial engineering. And it's for those reasons that Islamic finance is such a hot commodity at present.
With the financial crisis, the sukuk market has almost died down. When do you think the sukuk market will revive itself?
When there is confidence in the counter-parties, liquidity will start to flow.
Can you explain the ongoing controversy in the Shariah-compliance of certain sukuk models? Has this slowed down the sukuk growth?
Any embryonic industry has growing pains and the sukuk industry is not immune to this. The controversy highlighted the 'checks and balances' in Islamic finance.
It is said standardisation is one of the challenges being faced by Islamic finance. What are the steps taken so far to address this?
Standardisation is one of the most often talked about issues in Islamic finance. Does it make sense to stick to the rules already in place and trust they will help grow the industry? No. Innovation and invention are important to this industry's growth and development and they are attributes of a young versus mature industry. Islamic finance is practised in 57 Muslim countries and other non-Muslim countries. There are cultural influences; there are time influences [religion is 1,400-plus years old]. Islamic finance is in agreement on the prohibition against interest, speculation, uncertainty and financing of the 'sin' industry. It is the details of the contract that vary. We are where we should be at this stage, but we are always moving towards purity.
Do you believe Islamic finance could have been a solution to the current financial crisis?
It can certainly provide some good suggestions for the G20 countries to consider asset-backed financing, securitisation of real assets, avoidance of excessive leverage and intelligent use of derivatives. The world economy is worth trillions, whereas Islamic finance is approaching a $1trn industry, so it's not yet a true global heavy weight, but lessons can be shared.
How do you see the co-existence of conventional and Islamic finance in the coming years?
Malaysia is a great example of a dual banking system plus convergence. We are seeing a more level-playing field created by the UK's Financial Services Authority, Singapore's Monetary Authority of Singapore, Hong Kong Monetary Authority and so on.
Note: Siddiqui joined Thomson Reuters recently to head its Islamic finance business.
Having served 10 years with Dow Jones, where he was the global director for its Islamic market indices, Siddiqui led Dow Jones Indexes' global expansion into Islamic finance.
Prior to that, in the 1990s, Siddiqui was with the banking sector.
Abandoning the gold standard in 1971 has resulted in large global trade imbalances and a massive buildup of foreign currency reserves
These trade imbalances and buildup of foreign reserves have resulted in frequent booms and busts since 1971
The Japanese bust of 1989, the Asian economic crisis of 1997, and the current US credit market collapse have resulted from the post-1971 paper money monetary system
Abandoning the gold standard has gradually resulted in a very overvalued US dollar, and that the dollar is headed for disaster
“The dollar standard is inherently flawed and increasingly unstable. Its collapse will be the most important economic event of the 21st century.”
This week, I’m doing another book review, this time on “The Dollar Crisis” by Richard Duncan. Before I begin, I’ll make a prediction, since I’m an investor and my job is to predict. I increasingly believe that the dollar will collapse, and its ramifications could be as violent as when the credit markets cracked in July 2007. Currency collapses are nothing new, just as the bursting of a credit market bubble was nothing new. A dollar collapse could very well lead to carnage in domestic asset markets, whether it be the stock market, bond market, etc. Also, US imports and the overvalued dollar are fueling many of the export-oriented economies abroad, so a dollar collapse could wreak havoc on foreign asset markets as well. And once it happens, we’re going to view the collapse of the dollar as an obvious event that we should have long seen coming. Just as we now view the subprime wreckage and bursting of the real estate bubble as an event we should have easily predicted.
The problem is timing. Does the dollar collapse in 2009, or 2015? And is it a slow depreciation, or a sudden 50% fall? Those are tougher questions. Richard Duncan predicted the dollar’s demise in 2002. His error of timing discredited an otherwise brilliant book.
In a sentence, “The Dollar Crisis” is about how the world changed in 1971. That was when Richard Nixon dropped the gold standard (or its close cousin, the Bretton Woods international monetary system). Here’s the youtube video: Youtube Bretton Woods. The end of the gold standard ushered in a new era of large trade imbalances and the buildup of foreign currency reserves, and these trade imbalances and large foreign currency reserves have had significant impacts on the global economy that many people don’t realize. Huge trade imbalances and large foreign reserves didn’t really exist during the gold standard. During the gold standard, a country’s money supply was determined by the amount of gold it had. Banks’ reserves were either gold or indirectly tied to gold, and so the amount of money they could lend, and that the nation could print, was backed by the nation’s gold reserves. To see the implications of that sort of monetary system on trade imbalances, let’s take a hypothetical United States and China, where the US is buying lots of goods from China. The US gets goods; China gets dollars. China takes its excess dollars, gives them to the US, and gets gold in exchange. The US gold reserves would decline, causing credit contraction in the US. This would lead to recession; prices would adjust downwards; and falling prices would enhance the trade competitiveness of the US. The US would stop exporting so many goods from China as China’s costs of production begin rising relative to the United States’. The US would stop being a net importer; gold would flow back in; and equilibrium on the balance of payments would be re-established.
Under the gold standard, trade imbalances were unsustainable and self-correcting.
Today, in the system of fiat money, that’s no longer the case. The US gets goods; China gets dollars. China takes its excess dollars, and invests them back in the US, whether in the form of treasury bonds, Freddie Mac mortgage-backed securities, or US corporate bonds. The US takes those dollars and buys more Chinese goods. China gets more excess dollars and reinvests in the US. The US buys more Chinese goods. And on and on, until the US credit market debt as a % of GDP goes from 150% in 1970 to 350% in 2008. Just as reference, that number was 130% in 1950. During the gold standard, debt-to-GDP hardly grew. Under fiat money, it has soared. America isn’t awash in debt because we’re inherently greedy, profligate consumers. It’s because money is no longer backed by gold. China and Japan eagerly reinvest their dollars back in the United States so as to keep their currencies low relative to the US dollar. American consumers and companies happily borrow the money foreigners are throwing their way. The party lasted until 2007, when Americans finally began having trouble paying their enormous debts.
Note: Easy come...easy go? So will we see an Islamic Gold Dinar or ASEAN-China Gold YUAN in the days ahead?
Posted by: HiMYSYeD on Friday, June 05, 2009 - 09:28 AM EST (11477 Reads)
Islamic Finance Advisory Board (IFAB) cordially invites you to attend a free Introductory Seminar and Certification Course on Islamic Banking & Finance.
When & Where:
* Free Seminar:
Friday 5th June, 2009. 7:00 pm-9:00pm
Address: University of Toronto, St. Geoge Campus, Multi-Faith Centre,
569 Spadina Ave., Toronto, ON, M5S 2J7, Canada
* Certification Course:
Saturday June 6th, 2009. 10:00 am - 6:00 pm
Sunday June 7th, 2009. 10:00am - 6:00 pm
Address: University of Toronto, St. Geoge Campus, Multi-Faith Centre,
569 Spadina Ave., Toronto, ON, M5S 2J7, Canada
Learning Outcome:
* Get a comprehensive overview of the Islamic Banking and Finance Industry
* Recognize the fundamental instruments and concepts available and used in the industry
* Understand the differences between Islamic and Conventional based financing
* Completion Certificate
Price:
* Free (Seminar)
* Certification:
o $90 Students
o $125 Non-Students
o Scholarships Available*
Price goes toward learning materials, text book and other expenses.
*Full scholarship for students who qualify. Email info@islamicfinanceboard.com for more information.
Speakers:
Shaikh Hamid Slimi (Shariah Scholar) - Tentative
Dr. Azeemuddin Subhani (Shariah Compliance Advisor)
Mr. Rehan Saeed (MBA)
TORONTO, ONTARIO, CANADA --On the 20th anniversary of the Tiananmen Square massacre, we can remind ourselves of the saying from an era before that event which was a "New Beginning" between Mao's China, the United States, and the rest of the world: "Only Nixon could go to China".
Twenty years from today in 2029, on the 40th anniversary of the Tiananmen Square massacre, we will look back and say, "Only Obama could go to Egypt".
- He was channelling the oratory of another African American, Malcolm X / Malik El-Shabazz, even following his footsteps by first going to Saudi Arabia then to Egypt.
- As a Canadian, no mention nor nuance hint about Guantanamo and Canadian Citizen Omar Khadr being held there nor the Uighur being held there.
- On anniversary of Tiananmen Massacre, I was still expecting some Obama-esque charming indictment of that, especially when he talks of democracy in the Arab World, well, Mainland China is still waiting. But then again, China holds so much US debt that perhaps no American President will ever again be able to speak on this issue.
- As a pioneer and practioner in the Islamic Banking Industry, I have spoken with officials in NYC with the Treasury Department, literally a few days after Lehman Brothers collapsed, they admitted as much that had the US home financing market been based on Islamic Mortgages, and Islamic Financing ethics and contracts, the current U.S. economic crisis would be much less of a catastrophe than it is now.
- Dubai has collapsed and all the money and dealmaking has quietly returned to Saudi Arabia, Obama could have caused a great infusion of cash into the US economy by mentioning Islamic Finance and Islamic Banking , or a long term JFK-like Man on the Moon like vision, by aiming for a "dual-banking system", conventional and Islamic, or as the British call it, conventional and 'alternative' which is their euphemism for all things "Islamic" without using the word shariah.
The Cairo Speech could have reached into history to remind us all that the english word "Cheque" comes from the arabic word "Sakk" and it was the Ottomans who most recently impacted the U.S. in forming their republic as the U.S. founding fathers looked not to Ancient Rome, but rather to Istanbul (nee Islambul nee Constantinople) as a blueprint for government and administration.
Had Obama even said "Islamic Finance" once, he could have caused in my words a net in-flow of "Shariah Compliant Capital Flight" into U.S. Money centre banks and markets.
I am honored to be in the timeless city of Cairo, and to be hosted by two remarkable institutions. For over a thousand years, Al-Azhar has stood as a beacon of Islamic learning, and for over a century, Cairo University has been a source of Egypt's advancement. Together, you represent the harmony between tradition and progress. I am grateful for your hospitality, and the hospitality of the people of Egypt. I am also proud to carry with me the goodwill of the American people, and a greeting of peace from Muslim communities in my country: assalaamu alaykum.
We meet at a time of tension between the United States and Muslims around the world - tension rooted in historical forces that go beyond any current policy debate. The relationship between Islam and the West includes centuries of co-existence and cooperation, but also conflict and religious wars. More recently, tension has been fed by colonialism that denied rights and opportunities to many Muslims, and a Cold War in which Muslim-majority countries were too often treated as proxies without regard to their own aspirations. Moreover, the sweeping change brought by modernity and globalization led many Muslims to view the West as hostile to the traditions of Islam.
Violent extremists have exploited these tensions in a small but potent minority of Muslims. The attacks of September 11th, 2001 and the continued efforts of these extremists to engage in violence against civilians has led some in my country to view Islam as inevitably hostile not only to America and Western countries, but also to human rights. This has bred more fear and mistrust.
So long as our relationship is defined by our differences, we will empower those who sow hatred rather than peace, and who promote conflict rather than the cooperation that can help all of our people achieve justice and prosperity. This cycle of suspicion and discord must end.
I have come here to seek a new beginning between the United States and Muslims around the world; one based upon mutual interest and mutual respect; and one based upon the truth that America and Islam are not exclusive, and need not be in competition. Instead, they overlap, and share common principles - principles of justice and progress; tolerance and the dignity of all human beings.
I do so recognizing that change cannot happen overnight. No single speech can eradicate years of mistrust, nor can I answer in the time that I have all the complex questions that brought us to this point. But I am convinced that in order to move forward, we must say openly the things we hold in our hearts, and that too often are said only behind closed doors. There must be a sustained effort to listen to each other; to learn from each other; to respect one another; and to seek common ground. As the Holy Koran tells us, "Be conscious of God and speak always the truth." That is what I will try to do - to speak the truth as best I can, humbled by the task before us, and firm in my belief that the interests we share as human beings are far more powerful than the forces that drive us apart.
Part of this conviction is rooted in my own experience. I am a Christian, but my father came from a Kenyan family that includes generations of Muslims. As a boy, I spent several years in Indonesia and heard the call of the azaan at the break of dawn and the fall of dusk. As a young man, I worked in Chicago communities where many found dignity and peace in their Muslim faith.
As a student of history, I also know civilization's debt to Islam. It was Islam - at places like Al-Azhar University - that carried the light of learning through so many centuries, paving the way for Europe's Renaissance and Enlightenment. It was innovation in Muslim communities that developed the order of algebra; our magnetic compass and tools of navigation; our mastery of pens and printing; our understanding of how disease spreads and how it can be healed. Islamic culture has given us majestic arches and soaring spires; timeless poetry and cherished music; elegant calligraphy and places of peaceful contemplation. And throughout history, Islam has demonstrated through words and deeds the possibilities of religious tolerance and racial equality.
I know, too, that Islam has always been a part of America's story. The first nation to recognize my country was Morocco. In signing the Treaty of Tripoli in 1796, our second President John Adams wrote, "The United States has in itself no character of enmity against the laws, religion or tranquility of Muslims." And since our founding, American Muslims have enriched the United States. They have fought in our wars, served in government, stood for civil rights, started businesses, taught at our Universities, excelled in our sports arenas, won Nobel Prizes, built our tallest building, and lit the Olympic Torch. And when the first Muslim-American was recently elected to Congress, he took the oath to defend our Constitution using the same Holy Koran that one of our Founding Fathers - Thomas Jefferson - kept in his personal library.
So I have known Islam on three continents before coming to the region where it was first revealed. That experience guides my conviction that partnership between America and Islam must be based on what Islam is, not what it isn't. And I consider it part of my responsibility as President of the United States to fight against negative stereotypes of Islam wherever they appear.
But that same principle must apply to Muslim perceptions of America. Just as Muslims do not fit a crude stereotype, America is not the crude stereotype of a self-interested empire. The United States has been one of the greatest sources of progress that the world has ever known. We were born out of revolution against an empire. We were founded upon the ideal that all are created equal, and we have shed blood and struggled for centuries to give meaning to those words - within our borders, and around the world. We are shaped by every culture, drawn from every end of the Earth, and dedicated to a simple concept: E pluribus unum: "Out of many, one."
Much has been made of the fact that an African-American with the name Barack Hussein Obama could be elected President. But my personal story is not so unique. The dream of opportunity for all people has not come true for everyone in America, but its promise exists for all who come to our shores - that includes nearly seven million American Muslims in our country today who enjoy incomes and education that are higher than average.
Moreover, freedom in America is indivisible from the freedom to practice one's religion. That is why there is a mosque in every state of our union, and over 1,200 mosques within our borders. That is why the U.S. government has gone to court to protect the right of women and girls to wear the hijab, and to punish those who would deny it.
So let there be no doubt: Islam is a part of America. And I believe that America holds within her the truth that regardless of race, religion, or station in life, all of us share common aspirations - to live in peace and security; to get an education and to work with dignity; to love our families, our communities, and our God. These things we share. This is the hope of all humanity.
Of course, recognizing our common humanity is only the beginning of our task. Words alone cannot meet the needs of our people. These needs will be met only if we act boldly in the years ahead; and if we understand that the challenges we face are shared, and our failure to meet them will hurt us all.
For we have learned from recent experience that when a financial system weakens in one country, prosperity is hurt everywhere. When a new flu infects one human being, all are at risk. When one nation pursues a nuclear weapon, the risk of nuclear attack rises for all nations. When violent extremists operate in one stretch of mountains, people are endangered across an ocean. And when innocents in Bosnia and Darfur are slaughtered, that is a stain on our collective conscience. That is what it means to share this world in the 21st century. That is the responsibility we have to one another as human beings.
This is a difficult responsibility to embrace. For human history has often been a record of nations and tribes subjugating one another to serve their own interests. Yet in this new age, such attitudes are self-defeating. Given our interdependence, any world order that elevates one nation or group of people over another will inevitably fail. So whatever we think of the past, we must not be prisoners of it. Our problems must be dealt with through partnership; progress must be shared.
That does not mean we should ignore sources of tension. Indeed, it suggests the opposite: we must face these tensions squarely. And so in that spirit, let me speak as clearly and plainly as I can about some specific issues that I believe we must finally confront together.
The first issue that we have to confront is violent extremism in all of its forms.
In Ankara, I made clear that America is not - and never will be - at war with Islam. We will, however, relentlessly confront violent extremists who pose a grave threat to our security. Because we reject the same thing that people of all faiths reject: the killing of innocent men, women, and children. And it is my first duty as President to protect the American people.
The situation in Afghanistan demonstrates America's goals, and our need to work together. Over seven years ago, the United States pursued al Qaeda and the Taliban with broad international support. We did not go by choice, we went because of necessity. I am aware that some question or justify the events of 9/11. But let us be clear: al Qaeda killed nearly 3,000 people on that day. The victims were innocent men, women and children from America and many other nations who had done nothing to harm anybody. And yet Al Qaeda chose to ruthlessly murder these people, claimed credit for the attack, and even now states their determination to kill on a massive scale. They have affiliates in many countries and are trying to expand their reach. These are not opinions to be debated; these are facts to be dealt with.
Make no mistake: we do not want to keep our troops in Afghanistan. We seek no military bases there. It is agonizing for America to lose our young men and women. It is costly and politically difficult to continue this conflict. We would gladly bring every single one of our troops home if we could be confident that there were not violent extremists in Afghanistan and Pakistan determined to kill as many Americans as they possibly can. But that is not yet the case.
That's why we're partnering with a coalition of forty-six countries. And despite the costs involved, America's commitment will not weaken. Indeed, none of us should tolerate these extremists. They have killed in many countries. They have killed people of different faiths - more than any other, they have killed Muslims. Their actions are irreconcilable with the rights of human beings, the progress of nations, and with Islam. The Holy Koran teaches that whoever kills an innocent, it is as if he has killed all mankind; and whoever saves a person, it is as if he has saved all mankind. The enduring faith of over a billion people is so much bigger than the narrow hatred of a few. Islam is not part of the problem in combating violent extremism - it is an important part of promoting peace.
We also know that military power alone is not going to solve the problems in Afghanistan and Pakistan. That is why we plan to invest $1.5 billion each year over the next five years to partner with Pakistanis to build schools and hospitals, roads and businesses, and hundreds of millions to help those who have been displaced. And that is why we are providing more than $2.8 billion to help Afghans develop their economy and deliver services that people depend upon.
Let me also address the issue of Iraq. Unlike Afghanistan, Iraq was a war of choice that provoked strong differences in my country and around the world. Although I believe that the Iraqi people are ultimately better off without the tyranny of Saddam Hussein, I also believe that events in Iraq have reminded America of the need to use diplomacy and build international consensus to resolve our problems whenever possible. Indeed, we can recall the words of Thomas Jefferson, who said: "I hope that our wisdom will grow with our power, and teach us that the less we use our power the greater it will be."
Today, America has a dual responsibility: to help Iraq forge a better future - and to leave Iraq to Iraqis. I have made it clear to the Iraqi people that we pursue no bases, and no claim on their territory or resources. Iraq's sovereignty is its own. That is why I ordered the removal of our combat brigades by next August. That is why we will honor our agreement with Iraq's democratically-elected government to remove combat troops from Iraqi cities by July, and to remove all our troops from Iraq by 2012. We will help Iraq train its Security Forces and develop its economy. But we will support a secure and united Iraq as a partner, and never as a patron.
And finally, just as America can never tolerate violence by extremists, we must never alter our principles. 9/11 was an enormous trauma to our country. The fear and anger that it provoked was understandable, but in some cases, it led us to act contrary to our ideals. We are taking concrete actions to change course. I have unequivocally prohibited the use of torture by the United States, and I have ordered the prison at Guantanamo Bay closed by early next year.
So America will defend itself respectful of the sovereignty of nations and the rule of law. And we will do so in partnership with Muslim communities which are also threatened. The sooner the extremists are isolated and unwelcome in Muslim communities, the sooner we will all be safer.
The second major source of tension that we need to discuss is the situation between Israelis, Palestinians and the Arab world.
America's strong bonds with Israel are well known. This bond is unbreakable. It is based upon cultural and historical ties, and the recognition that the aspiration for a Jewish homeland is rooted in a tragic history that cannot be denied.
Around the world, the Jewish people were persecuted for centuries, and anti-Semitism in Europe culminated in an unprecedented Holocaust. Tomorrow, I will visit Buchenwald, which was part of a network of camps where Jews were enslaved, tortured, shot and gassed to death by the Third Reich. Six million Jews were killed - more than the entire Jewish population of Israel today. Denying that fact is baseless, ignorant, and hateful. Threatening Israel with destruction - or repeating vile stereotypes about Jews - is deeply wrong, and only serves to evoke in the minds of Israelis this most painful of memories while preventing the peace that the people of this region deserve.
On the other hand, it is also undeniable that the Palestinian people - Muslims and Christians - have suffered in pursuit of a homeland. For more than sixty years they have endured the pain of dislocation. Many wait in refugee camps in the West Bank, Gaza, and neighboring lands for a life of peace and security that they have never been able to lead. They endure the daily humiliations - large and small - that come with occupation. So let there be no doubt: the situation for the Palestinian people is intolerable. America will not turn our backs on the legitimate Palestinian aspiration for dignity, opportunity, and a state of their own.
For decades, there has been a stalemate: two peoples with legitimate aspirations, each with a painful history that makes compromise elusive. It is easy to point fingers - for Palestinians to point to the displacement brought by Israel's founding, and for Israelis to point to the constant hostility and attacks throughout its history from within its borders as well as beyond. But if we see this conflict only from one side or the other, then we will be blind to the truth: the only resolution is for the aspirations of both sides to be met through two states, where Israelis and Palestinians each live in peace and security.
That is in Israel's interest, Palestine's interest, America's interest, and the world's interest. That is why I intend to personally pursue this outcome with all the patience that the task requires. The obligations that the parties have agreed to under the Road Map are clear. For peace to come, it is time for them - and all of us - to live up to our responsibilities.
Palestinians must abandon violence. Resistance through violence and killing is wrong and does not succeed. For centuries, black people in America suffered the lash of the whip as slaves and the humiliation of segregation. But it was not violence that won full and equal rights. It was a peaceful and determined insistence upon the ideals at the center of America's founding. This same story can be told by people from South Africa to South Asia; from Eastern Europe to Indonesia. It's a story with a simple truth: that violence is a dead end. It is a sign of neither courage nor power to shoot rockets at sleeping children, or to blow up old women on a bus. That is not how moral authority is claimed; that is how it is surrendered.
Now is the time for Palestinians to focus on what they can build. The Palestinian Authority must develop its capacity to govern, with institutions that serve the needs of its people. Hamas does have support among some Palestinians, but they also have responsibilities. To play a role in fulfilling Palestinian aspirations, and to unify the Palestinian people, Hamas must put an end to violence, recognize past agreements, and recognize Israel's right to exist.
At the same time, Israelis must acknowledge that just as Israel's right to exist cannot be denied, neither can Palestine's. The United States does not accept the legitimacy of continued Israeli settlements. This construction violates previous agreements and undermines efforts to achieve peace. It is time for these settlements to stop.
Israel must also live up to its obligations to ensure that Palestinians can live, and work, and develop their society. And just as it devastates Palestinian families, the continuing humanitarian crisis in Gaza does not serve Israel's security; neither does the continuing lack of opportunity in the West Bank. Progress in the daily lives of the Palestinian people must be part of a road to peace, and Israel must take concrete steps to enable such progress.
Finally, the Arab States must recognize that the Arab Peace Initiative was an important beginning, but not the end of their responsibilities. The Arab-Israeli conflict should no longer be used to distract the people of Arab nations from other problems. Instead, it must be a cause for action to help the Palestinian people develop the institutions that will sustain their state; to recognize Israel's legitimacy; and to choose progress over a self-defeating focus on the past.
America will align our policies with those who pursue peace, and say in public what we say in private to Israelis and Palestinians and Arabs. We cannot impose peace. But privately, many Muslims recognize that Israel will not go away. Likewise, many Israelis recognize the need for a Palestinian state. It is time for us to act on what everyone knows to be true.
Too many tears have flowed. Too much blood has been shed. All of us have a responsibility to work for the day when the mothers of Israelis and Palestinians can see their children grow up without fear; when the Holy Land of three great faiths is the place of peace that God intended it to be; when Jerusalem is a secure and lasting home for Jews and Christians and Muslims, and a place for all of the children of Abraham to mingle peacefully together as in the story of Isra, when Moses, Jesus, and Mohammed (peace be upon them) joined in prayer.
The third source of tension is our shared interest in the rights and responsibilities of nations on nuclear weapons.
This issue has been a source of tension between the United States and the Islamic Republic of Iran. For many years, Iran has defined itself in part by its opposition to my country, and there is indeed a tumultuous history between us. In the middle of the Cold War, the United States played a role in the overthrow of a democratically-elected Iranian government. Since the Islamic Revolution, Iran has played a role in acts of hostage-taking and violence against U.S. troops and civilians. This history is well known. Rather than remain trapped in the past, I have made it clear to Iran's leaders and people that my country is prepared to move forward. The question, now, is not what Iran is against, but rather what future it wants to build.
It will be hard to overcome decades of mistrust, but we will proceed with courage, rectitude and resolve. There will be many issues to discuss between our two countries, and we are willing to move forward without preconditions on the basis of mutual respect. But it is clear to all concerned that when it comes to nuclear weapons, we have reached a decisive point. This is not simply about America's interests. It is about preventing a nuclear arms race in the Middle East that could lead this region and the world down a hugely dangerous path.
I understand those who protest that some countries have weapons that others do not. No single nation should pick and choose which nations hold nuclear weapons. That is why I strongly reaffirmed America's commitment to seek a world in which no nations hold nuclear weapons. And any nation - including Iran - should have the right to access peaceful nuclear power if it complies with its responsibilities under the nuclear Non-Proliferation Treaty. That commitment is at the core of the Treaty, and it must be kept for all who fully abide by it. And I am hopeful that all countries in the region can share in this goal.
The fourth issue that I will address is democracy.
I know there has been controversy about the promotion of democracy in recent years, and much of this controversy is connected to the war in Iraq. So let me be clear: no system of government can or should be imposed upon one nation by any other.
That does not lessen my commitment, however, to governments that reflect the will of the people. Each nation gives life to this principle in its own way, grounded in the traditions of its own people. America does not presume to know what is best for everyone, just as we would not presume to pick the outcome of a peaceful election. But I do have an unyielding belief that all people yearn for certain things: the ability to speak your mind and have a say in how you are governed; confidence in the rule of law and the equal administration of justice; government that is transparent and doesn't steal from the people; the freedom to live as you choose. Those are not just American ideas, they are human rights, and that is why we will support them everywhere.
There is no straight line to realize this promise. But this much is clear: governments that protect these rights are ultimately more stable, successful and secure. Suppressing ideas never succeeds in making them go away. America respects the right of all peaceful and law-abiding voices to be heard around the world, even if we disagree with them. And we will welcome all elected, peaceful governments - provided they govern with respect for all their people.
This last point is important because there are some who advocate for democracy only when they are out of power; once in power, they are ruthless in suppressing the rights of others. No matter where it takes hold, government of the people and by the people sets a single standard for all who hold power: you must maintain your power through consent, not coercion; you must respect the rights of minorities, and participate with a spirit of tolerance and compromise; you must place the interests of your people and the legitimate workings of the political process above your party. Without these ingredients, elections alone do not make true democracy.
The fifth issue that we must address together is religious freedom.
Islam has a proud tradition of tolerance. We see it in the history of Andalusia and Cordoba during the Inquisition. I saw it firsthand as a child in Indonesia, where devout Christians worshiped freely in an overwhelmingly Muslim country. That is the spirit we need today. People in every country should be free to choose and live their faith based upon the persuasion of the mind, heart, and soul. This tolerance is essential for religion to thrive, but it is being challenged in many different ways.
Among some Muslims, there is a disturbing tendency to measure one's own faith by the rejection of another's. The richness of religious diversity must be upheld - whether it is for Maronites in Lebanon or the Copts in Egypt. And fault lines must be closed among Muslims as well, as the divisions between Sunni and Shia have led to tragic violence, particularly in Iraq.
Freedom of religion is central to the ability of peoples to live together. We must always examine the ways in which we protect it. For instance, in the United States, rules on charitable giving have made it harder for Muslims to fulfill their religious obligation. That is why I am committed to working with American Muslims to ensure that they can fulfill zakat.
Likewise, it is important for Western countries to avoid impeding Muslim citizens from practicing religion as they see fit - for instance, by dictating what clothes a Muslim woman should wear. We cannot disguise hostility towards any religion behind the pretence of liberalism.
Indeed, faith should bring us together. That is why we are forging service projects in America that bring together Christians, Muslims, and Jews. That is why we welcome efforts like Saudi Arabian King Abdullah's Interfaith dialogue and Turkey's leadership in the Alliance of Civilizations. Around the world, we can turn dialogue into Interfaith service, so bridges between peoples lead to action - whether it is combating malaria in Africa, or providing relief after a natural disaster.
The sixth issue that I want to address is women's rights.
I know there is debate about this issue. I reject the view of some in the West that a woman who chooses to cover her hair is somehow less equal, but I do believe that a woman who is denied an education is denied equality. And it is no coincidence that countries where women are well-educated are far more likely to be prosperous.
Now let me be clear: issues of women's equality are by no means simply an issue for Islam. In Turkey, Pakistan, Bangladesh and Indonesia, we have seen Muslim-majority countries elect a woman to lead. Meanwhile, the struggle for women's equality continues in many aspects of American life, and in countries around the world.
Our daughters can contribute just as much to society as our sons, and our common prosperity will be advanced by allowing all humanity - men and women - to reach their full potential. I do not believe that women must make the same choices as men in order to be equal, and I respect those women who choose to live their lives in traditional roles. But it should be their choice. That is why the United States will partner with any Muslim-majority country to support expanded literacy for girls, and to help young women pursue employment through micro-financing that helps people live their dreams.
Finally, I want to discuss economic development and opportunity.
I know that for many, the face of globalization is contradictory. The Internet and television can bring knowledge and information, but also offensive sexuality and mindless violence. Trade can bring new wealth and opportunities, but also huge disruptions and changing communities. In all nations - including my own - this change can bring fear. Fear that because of modernity we will lose of control over our economic choices, our politics, and most importantly our identities - those things we most cherish about our communities, our families, our traditions, and our faith.
But I also know that human progress cannot be denied. There need not be contradiction between development and tradition. Countries like Japan and South Korea grew their economies while maintaining distinct cultures. The same is true for the astonishing progress within Muslim-majority countries from Kuala Lumpur to Dubai. In ancient times and in our times, Muslim communities have been at the forefront of innovation and education.
This is important because no development strategy can be based only upon what comes out of the ground, nor can it be sustained while young people are out of work. Many Gulf States have enjoyed great wealth as a consequence of oil, and some are beginning to focus it on broader development. But all of us must recognize that education and innovation will be the currency of the 21st century, and in too many Muslim communities there remains underinvestment in these areas. I am emphasizing such investments within my country. And while America in the past has focused on oil and gas in this part of the world, we now seek a broader engagement.
On education, we will expand exchange programs, and increase scholarships, like the one that brought my father to America, while encouraging more Americans to study in Muslim communities. And we will match promising Muslim students with internships in America; invest in on-line learning for teachers and children around the world; and create a new online network, so a teenager in Kansas can communicate instantly with a teenager in Cairo.
On economic development, we will create a new corps of business volunteers to partner with counterparts in Muslim-majority countries. And I will host a Summit on Entrepreneurship this year to identify how we can deepen ties between business leaders, foundations and social entrepreneurs in the United States and Muslim communities around the world.
On science and technology, we will launch a new fund to support technological development in Muslim-majority countries, and to help transfer ideas to the marketplace so they can create jobs. We will open centers of scientific excellence in Africa, the Middle East and Southeast Asia, and appoint new Science Envoys to collaborate on programs that develop new sources of energy, create green jobs, digitize records, clean water, and grow new crops. And today I am announcing a new global effort with the Organization of the Islamic Conference to eradicate polio. And we will also expand partnerships with Muslim communities to promote child and maternal health.
All these things must be done in partnership. Americans are ready to join with citizens and governments; community organizations, religious leaders, and businesses in Muslim communities around the world to help our people pursue a better life.
The issues that I have described will not be easy to address. But we have a responsibility to join together on behalf of the world we seek - a world where extremists no longer threaten our people, and American troops have come home; a world where Israelis and Palestinians are each secure in a state of their own, and nuclear energy is used for peaceful purposes; a world where governments serve their citizens, and the rights of all God's children are respected. Those are mutual interests. That is the world we seek. But we can only achieve it together.
I know there are many - Muslim and non-Muslim - who question whether we can forge this new beginning. Some are eager to stoke the flames of division, and to stand in the way of progress. Some suggest that it isn't worth the effort - that we are fated to disagree, and civilizations are doomed to clash. Many more are simply skeptical that real change can occur. There is so much fear, so much mistrust. But if we choose to be bound by the past, we will never move forward. And I want to particularly say this to young people of every faith, in every country - you, more than anyone, have the ability to remake this world.
All of us share this world for but a brief moment in time. The question is whether we spend that time focused on what pushes us apart, or whether we commit ourselves to an effort - a sustained effort - to find common ground, to focus on the future we seek for our children, and to respect the dignity of all human beings.
It is easier to start wars than to end them. It is easier to blame others than to look inward; to see what is different about someone than to find the things we share. But we should choose the right path, not just the easy path. There is also one rule that lies at the heart of every religion - that we do unto others as we would have them do unto us. This truth transcends nations and peoples - a belief that isn't new; that isn't black or white or brown; that isn't Christian, or Muslim or Jew. It's a belief that pulsed in the cradle of civilization, and that still beats in the heart of billions. It's a faith in other people, and it's what brought me here today.
We have the power to make the world we seek, but only if we have the courage to make a new beginning, keeping in mind what has been written.
The Holy Koran tells us, "O mankind! We have created you male and a female; and we have made you into nations and tribes so that you may know one another."
The Talmud tells us: "The whole of the Torah is for the purpose of promoting peace."
The Holy Bible tells us, "Blessed are the peacemakers, for they shall be called sons of God."
The people of the world can live together in peace. We know that is God's vision. Now, that must be our work here on Earth. Thank you. And may God's peace be upon you.
NEW YORK, NEW YORK -- Daoud Hawa bought a home worth US$550,000 (Dh2 million) four years ago with a Sharia-compliant mortgage because he wanted to go on the haj in a state of purity and without any debt.
“I did my research on the finance company and consulted my imam before I went ahead with this mortgage,” said Mr Hawa, who is 35, married with two children, and runs a marketing company.
Guidance Residential, an Islamic mortgage company, undertook stringent checks of Mr Hawa’s finances, including income, savings and liabilities to make sure he could afford the mortgage.
“Our conservatism has kept us out of the current financial mess,” says Hussam Qutub of Guidance Residential. George Ruhe for The National
By contrast, during the property boom years up until two years ago, other companies issued loans to low-income residents who relied on rising real estate values as collateral in what became the “sub-prime” crisis. Millions of US residents are now struggling with loans worth far more than their homes are worth, or are being foreclosed on after non-payment.
Meanwhile, Mr Hawa’s home has gone up in value to around $700,000.
Interest in Islamic finance is growing beyond the American-Muslim community because the recession has forced more people to question the nature of conventional debt and interest, said Hussam Qutub, a spokesman for Guidance Residential, which is based in Virginia.
The company has provided more than $1.5 billion in home financing to at least 6,000 customers in 23 states since it launched seven years ago. April was a record month. Guidance Residential, whose mortgages are backed by Freddie Mac, the government’s home-financing giant, signed 150 contracts.
“We were surprised because usually June is our best month because that’s when kids are out of school and families look to move,” said Mr Qutub, who said his company accounted for around half of the US market share of Islamic mortgages.
Competitors include Lariba American Finance House in California and University Bank in Michigan.
Delinquencies, where borrowers fall behind on payments, accounted for less than half the national rate of 7.8 per cent at the end of last year. The company has only served about five foreclosure notices because the majority of its clients only took on liabilities that they could afford, he said.
By comparison, a record number of foreclosure actions started nationally in the first three months of this year, up 27 per cent from the same quarter last year, the Mortgage Bankers Association said last week.
“We have to give credit to the American Muslim community, who are conservative in the way they handle money and make sure to have savings for times of financial hardship,” Mr Qutub said. “We really take our hat off to the community.”
Under Islamic law, Muslims are prohibited from riba, often translated as interest, and are encouraged to make financial transactions tied to concrete goods or services rather than make money out of money.
The US Islamic finance market is not as developed as in Europe, where more companies have ties to Islamic institutions in leading finance centres in the Middle East and Malaysia.
More Sharia-compliant products are being developed for American Muslims, but Mr Hawa said he tried to be cautious, given the wide array of often conflicting interpretations given by different Islamic boards, which are assembled by companies to get their Islamic stamp of approval. Islamic laws related to finance are widely interpreted across and within the Islamic world. Muslim investors generally try to avoid any transactions related to interest, alcohol, gambling, pork and other haram activities.
“An Islamic tag doesn’t necessarily mean anything, so I’m doing careful research into an Islamic home insurance product that I’ve seen,” he said. “I do use credit cards, but I never carry any balance and I pay them off. I don’t have any debt [with interest] and bought my car at zero per cent financing.”
Guidance Residential’s mortgage model requires the company to take an ownership stake in the home along with the customer, who pays a rental fee as well as monthly payments to buy the company’s share in the home.
If a customer falls behind on payments, the company charges a $50 fee, rather than the compound interest usually imposed by traditional companies. If a home is foreclosed, losses are borne according to the ownership stakes of the customer and company, which does not then pursue the customer to regain its financial stake.
Some critics say a rental fee is akin to interest on a mortgage loan. But Mr Hawa said it was the joint ownership contract that made him feel religiously comfortable with the product, just as a legal contract distinguishes and defines marriage from other partnerships.
The chairman of Guidance Residential’s Sharia supervisory board is Muhammad Taqi Usmani, a leading Islamic scholar who last year declared many sukuk, or Islamic, bonds to be scarcely better than traditional interest-bearing instruments. His standing meant his ruling carried weight throughout the Islamic financial world, although debate continues to swirl in the absence of a uniform regulatory framework.
“We were lucky to get scholars like Muhammad Taqi Usmani because when we started out, there was not as much demand and it would be impossible to get them today,” Mr Qutub said. “Their involvement is not as great as in the early days, but they continue to conduct regular audits.”
Guidance Residential is hoping to develop other products, such as deposit and chequing accounts and commercial financing. The combined buying power of American Muslims has been estimated at $170bn annually by JWT, an advertising agency.
Meanwhile, Guidance Financial Group, the parent company, has helped companies in Saudi Arabia and Malaysia offer mortgages modelled on its product.
Mr Qutub said he does not know how many of its customers are non-Muslim because the company does not ask and religious affiliation is not a prerequisite for qualification, but he said interest was growing.
An employee in Chicago told him about a friend who was a Jewish lawyer who conducted thorough due diligence of the mortgage model before signing on.
“Our conservatism has kept us out of the current financial mess because we never put people in homes who didn’t qualify and couldn’t afford it,” Mr Qutub said.
There is always a flight to quality in times of uncertainty. But even before September 11, globally branded and rated financial institutions were increasingly providing Islamic finance directly or in partnership with regional distributors. Just as Internet-only banks soon faced competition from conventional banks, so also will Islamic banks.
The document, launched yesterday at a major UN gathering of financial service companies in Cape Town, South Africa (
At the event, the speakers addressed a variety of issues ranging from opportunities in this field and challenges in making it compatible in the existing environment, to future outlooks of the industry. 
Can you tell us how big the Islamic finance market is now?
“Our conservatism has kept us out of the current financial mess,” says Hussam Qutub of Guidance Residential. George Ruhe for The National
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