Harris Irfan’s Heaven's Bankers (Constable & Robinson) is the first inside job on the rather opaque world of Islamic, Sharia-compliant finance, now worth hundreds of billions of dollars. It is not deliberately opaque, but only because outsiders tend to butt at the wall while Islamic bankers step nimbly around it. We try to size up a banking system created for a 7th century tribal society in the desert against the Western system, born in cosmopolitan 15th century Italy and designed for colonial profiteering. It’s a bad fit, and the idea of profiting without interest is baffling. Profit-driven mainstream banking has commodified money. Markets trade in fiat cash and its derivatives. Some mutual funds bet exclusively on banking, the ultimate derivative of money. In contrast, Sharia holds that money itself is not a good; it is useless until it is applied. “It cannot be eaten and it does not provide heat or shelter,” writes Irfan. Germans who remember the collapse of the Deutsche Mark in 1945, after Berlin fell, may disagree. They had burned banknotes for heating and cooking, and used it for wallpaper. But in peacetime, the distinction between money as commodity and money as instrument is valuable. Pure capitalism asks: “What did my money earn?” The Islamic banker’s question is larger: “What did my money achieve?” If Wall Street’s products were policed as vigorously as insider trading and front-running, there would have been no meltdown. In 2008, investment bankers created derivatives that they knew would fail, sold them to trusting customers and then bet vigorously against them, bringing them down. In comparison, usury, which Sharia and the Church banned, looks disarmingly benign. Etymologically, from the Latin, it suggests investment — money put to use, for legitimate usufruct. In medieval Europe, it gained the sense of unfair, unearned profit. Roughly speaking, if you felt ripped off by lenders, you called them usurers. In 1787, in Defence of Usury, Jeremy Bentham grappled with the idea: “I know of but two definitions that can possibly be given of usury: one is, the taking of a greater interest than the law allows of… The other is the taking of a greater interest than it is usual for men to give and take.” About 150 years later, the Nazis would play upon the ancient Gentile repugnance for usury to legitimise the Holocaust. In the late ’90s, sensing opportunity in their multicultural societies and in the booming Emirates, European bankers launched Islamic products. Just before 9/11 permanently altered perceptions of Islam, Deutsche Bank transferred Harris Irfan from London to the new frontier of Dubai. From that experience, he offers fascinating insights into a financial system driven by Islamic scholars rather than number-crunchers. He exposes conjuring tricks, like banks avoiding the usury of housing loans by buying a house for the customer and transferring it to them profitably. But the ancient instruments of Islamic finance are honestly risk-averse. Even if some of them, like hawala, have acquired a lurid cast in South Asia, they laid the foundations of intercontinental trade 1,200 years ago, when Islam stretched from Iberia to western China.
