Four Initiatives Islamic Finance Must Undertake to Keep Itself Relevant in Changing Times
An invasion of armies can be resisted, but not an idea whose time has come. (Victor Hugo)
The coming years — faced with a confluence of factors ranging from climate change and peak oil to currency crisis and food and water shortage — offer an unprecedented opportunity for Islamic finance to rise to the occasion.
To do so, we respectfully call upon governments, regulators, and the scholars of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), to develop standards, products, and human capital to undertake four major initiatives:
Launch a gold-based currency
- Develop Shariah standards for the environment
- Support community-based finance
- Regulate Shariah standards
But first, it is worth stepping back to assess the gravity of the problem before we consider the urgency of the response.
According to a growing number of climate scientists, in the next few decades — within the lifetimes of many of us and certainly those of our children — the world will undergo major upheaval, with widespread food and water shortage, energy insecurity, mass migration, and unprecedented weather patterns. All things we already see to varying degrees in different parts of the world. But today is just the harbinger. Many scientists, among whom “The Revenge of Gaia” author James Lovelock is most notable, now predict that as many as 80% of the world’s population will perish amid the cataclysms of the 21st century.
The consequence of global heating in our own lives will not be felt so much in the discomfort of extreme heat during summers or, as for some in coastal areas, rising sea levels, but in the extreme shortage of food, water, and energy, now already being felt across the developing world. While these may seem extreme predictions, a growing body of data shows that successive intergovernmental forecasts about the impact of carbon emissions on climate change fall far short of observable reality.
While the evidence has been around for some decades, with most of us only squirming in vague unease at the data, it is gaining mainstream following especially within the last decade, when the proverbial writing is now on the wall: friends without water, gas, and electricity back home; nasty sheets of ice blanketing cities causing power outages; entire countries facing submergence.
Despite this, mainstream corporate media earnestly repeats the growth mantra (“we must have growth for prosperity”) and while it occasionally laments the rise of carbon emissions, the media conveniently manages to avoid asking the obvious “why?” question: why must we have unchecked growth when this is the very thing that causes all our problems?
The answer is becoming plainer for all to see, especially in the wake of the bailout debacle: banks.
In order for banks to survive, there must be compound interest, and in order to keep up with compound interest, you must have compound growth. However, as Margaret Atwood, author of “Payback: Debt and the Shadow Side of Wealth,” notes, “Instead of thinking that nature is this huge bank that we can just keep drawing on, we have to think about the finite nature of this planet to keep it alive so that we too may remain alive. Unless we conserve the planet there isn’t going to be any ‘The Economy.’”
What can Islamic finance do? As it turns out, a great deal.
With conventional finance incapable of thinking outside an interest-based box (“the problem is sub-primes,” “corporate bailouts,” “actually, the problem is greed,” “corporate lobbying needs reform”), the West appears condemned to repeat the mistakes it refuses to learn from. The problem of interest is now so systemic, so deeply rooted, that it may be too close for many to see. Even to this day searching “bank interest and global warming” on the Internet yields almost nothing (except Ethica’s webinar “Interest-Based Finance and Global Warming — Making the Connection”).
What is needed is a paradigm shift in our approach to currency, the environment, the community, and Islamic banks.
Part 2 of 6: Launching a Gold-Based Currency