Who's Afraid of Islamic Finance?

While Tunisia's Islamist party tries to downplay the role of Islamic finance, Hong Kong welcomes it with open arms. Why?


Leung Chun-ying, Hong Kong's new chief executive (left) and Rached Ghannouchi, Ennahda Party leader (right) / Reuters

Tunisia's newly elected Islamist government said this week that it will preserve the nation's pre-revolutionary secular constitution and financial structures. Far away, in secular and wealthy Hong Kong, the local government is pushing to establish a platform for Islamic finance in hopes of becoming the Dubai of the Far East. What's going on here?

Witness the power of marketing. Tunisia's main source of tourism and exports is Europe, where perennial outcries against Muslim immigrants and sharia have incited violence among Europe's anti-Islamic extremists in recent years. Hong Kong, together with the Greater China Region, is courting the Muslim business world to quench its thirst for natural fuels. As a result, we have an odd juxtaposition: An Islamist government downplaying gestures to welcome Islamic finance while a secular capitalist juggernaut claims to welcome it.


Islamic finance largely revolves around a Qur'anic prohibition on usury -- taken to mean all forms of interest by modern practitioners. Instead of dealing in non-tangibles like interest and credit, the system bases loans on collateral and treats moneylenders -- a pejorative term in Islamic scriptures, as well in Jewish and Christian scriptures -- as "investors."

For example, in an Islamic mortgage, a bank purchases the prospective homeowner's property from the realtor. Instead of charging the homeowner interest on a loan, the bank calculates a fixed service fee, to be paid in increments.

"It's a pretense that you are not lending money, but in effect, you are," said Farid Abolfathi, a Middle East economy expert at international consulting company IHS Global Insights, explaining that the economic benefit of Islamic finance is, for the most part, allowing Muslim business interests to "participate in the financial system without feeling they are doing anything wrong."


This week, Tunisia's ruling Ennahda Party promised the international community the Tunisian constitution -- and economy -- will remain secular. The party has made that painfully clear. Just after winning the Tunisian Constituent Assembly election in October, Nahda representatives first promised international investors  there would be no Islamic renaissance in the nation's financial sector, and they made the same promise at this year's World Economic Forum in Davos.

The Tunisian economy has long depended on European tourism and investment to grow its economy.

"There are people who want the old, secular model of banking. That system will continue, because it is internationally accepted," said Walid Banneni, vice president of Ennahda, on the phone from Tunis.

Banneni explained that a secular financial infrastructure is one of few "achievements of the [ousted] Ben Ali regime" that will remain intact. "[We are] not trying to not alarm others into thinking these guys are radicals or are likely to upset the equilibrium of society," he said.

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Massoud Hayoun is a digital-news producer for Al Jazeera America.

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