FaithWorld

(An employee counts Indian rupee notes inside a bank in Agartala, capital of India's northeastern state of Tripura December 31, 2010/Jayanta Dey)

In a bank with no security gates, guards or locks, deposits from thousands of customers from across India are stacked on shelves, protected from theft by the grace of God. In a cramped room in a small house in the north Indian state of Uttar Pradesh, Ram Ram Bank offers no interest or loans, but has around 5,000 customers who flock to deposit documents bearing God’s name.

“There is no need for security as there is no fear of any theft,” said Lovelesh Tewari, who founded the bank 25 years ago. “People feel better by writing God’s name as it becomes a medium to release their pent up frustrations and eventually the faith makes them work toward their goals.”

The bank’s customers scribble “Ram,” the protagonist in the Indian mythological epic Ramayana, on pieces of paper as many as 100,000 times and deposit them in the bank. Ram is also known as Rama. Ram Ram used to accept scribbles on cigarette packs or on pieces of old newspaper. But now Tewari provides proper notebooks for the purpose, courtesy of one of his customers.

Religion is no barrier. Hindus, Sikhs and Muslims write the name of Ram in their native languages. Every six months the stacks of “deposits” are sent to be displayed in a temple in Ayodhya, the birth place of Ram.

Bankers in Islamic finance are increasingly outsourcing sharia supervision due to a lack of scholars in the industry, but critics say this is making the sector even less transparent and slowing its development.

The $1 trillion industry rode a five-year oil boom until the 2008 property crash in the Gulf Arab region raised complaints that many of its investment instruments can be seen as mere copy-cats of conventional banking products, threatening the sector’s future growth. (Photo: Dealers at the Amman Stock Exchange on October 11, 2010/Ali Jarekji)

Critics say growth and product innovation is being further stifled by the limited number of top scholars available to join the sharia boards of Islamic banks, some sitting on up to 80 boards.

(Photo: Islamic Financial Centre booth at Malaysia’s Central Bank – High Level Conference 2009 in Kuala Lumpur February 10, 2009/Zainal Abd Halim)

When Malaysian Aida Othman signed up for the new law programme at the International Islamic University in Kuala Lumpur, she did not expect to become one the few women with their hands on the levers of the world’s $1 trillion Islamic finance sector.

Rising global demand for scholars who can advise firms on compliance with Islamic legal principles called sharia is behind the quiet and almost accidental way in which women are growing into a small but powerful force in a male-dominated business.

“There are not many women involved my job,” Aida, who manages the sharia advisory practice at Malaysia’s biggest law firm, told Reuters. “I’m glad to be able to show to young graduates and young scholars in my field if you’re interested enough there is a way into sharia advisory,” the 41-year-old, who went on to study at Cambridge and Harvard, said.

Islamic finance is toughening supervision of its powerful religious advisers as shareholders worldwide demand increasing accountability from directors, but key reforms may do little to boost independence and transparency.

Key to these challenges is the small number of scholars advising a growing number of banks on increasingly complex financing structures, raising issues such as transparency of rulings, independence of advisers and how to groom new scholars. (Photo: Dubai Islamic Bank in Dubai, September 28, 2010/Jumana El-Heloueh)

But varying sharia standards, different regulatory approaches and vast disparities in development across markets stand in the way of reforms to streamline and boost supervision, which are critical to growth.

The Vatican bank’s top two officials are under investigation for suspected money laundering and police have frozen 23 million euros ($30.21 million) of its funds, Italian judicial sources said on Tuesday.

They said President Ettore Gotti Tedeschi and director-general Paolo Cipriani were being investigated by Rome magistrates Nello Rossi and Stefano Fava in a case involving alleged violations of European Union money-laundering rules.

The Vatican confirmed the Rome magistrates’ action in a statement that expressed “perplexity and amazement” at the move and “utmost faith” in the two men who head the bank, officially known as Institute for Religious Works (IOR).  It said the bank had committed no wrongdoing because it was transferring its own money between its own accounts.

With Islamic finance a $1 trillion industry globally and expected by ratings agency Moody’s to reach $5 trillion in time, students of sharia have more opportunities than ever before to take their skills beyond the mosque doors and into the boardroom.

Reflecting the change in times, many current scholars now prefer to call themselves sharia advisors or technicians to suggest that their duties are more professional rather than simply clerical. (Photo: Dubai Islamic Bank, January 28, 2008/Jumana El Heloueh)

Professionally, it can be a lucrative endeavor. Scholars working on Islamic finance deals are paid consulting fees, depending not only on the services provided but also the seniority and fame of the scholar.

A currency dealer counts Kenya shillings in Nairobi on October 23, 2008/Antony Njuguna

Africa’s Islamic finance industry needs to overcome negative perceptions among non-Muslims to successfully expand into predominantly Christian sub-Saharan Africa, an industry leader has said.

Northern Africa is largely Muslim and countries such as Egypt and Sudan have offered Islamic banking for decades.  Now some lenders are looking to expand into sub-Saharan nations, such as Uganda which is 80 per cent Christian.

A teller at Bank Syariah Mandiri in Jakarta February 17, 2010/Supri

Sharia boards face increased scrutiny and criticism as high-profile corporate defaults and cautionary comments from respected scholars cast a harsh light on the fast growth of financial products touted as Islamic.

Experts say rapid growth in the industry, which some estimates value at around $1 trillion, has put more pressure on scholars to sign off on increasingly complicated structures, wrapped in sharia packaging.

“In areas that have to do with capital guarantees, fixed income and derivatives … 40 to 50 percent of what’s being sent out is form over substance,” said Jawad Ali, managing partner at Dubai-based law firm King & Spalding.  “Mistakes do happen when a sharia board focuses on the instrument being presented … and there is little scrutiny on how the structures are being implemented.”

Check out the headline at the bottom left of the Sunday Times front page. The man the London paper calls the most powerful banker on Earth says he is “just a banker ‘doing God’s work’” .

The report says Goldman Sachs chief executive Lloyd Blankfein“proudly pays himself more in a year than most of us could ever dream of — $68m in 2007 alone, a record for any Wall Street CEO, to add to the more than $500m of Goldman stock he owns” .

Goldman Sachs looks set to pay about $20 billion in bonuses for its top traders this year, at a time when the fallout from last year’s financial crisis is still being felt and the United States unemployment rate has hit 10.2 percent, a 26-1/2-year high.

In researching an article on what lay behind government plans to develop France as a European hub for Islamic finance, I was struck by the uneasy atmosphere surrounding the subject. On the one hand, the government sees it as a way to attract Middle Eastern money and wants to push the idea. But on the other, there is a clear sense of apprehension over how Islamic finance would fit into French society, where the policy of laïcité – the strict separation of church and state — tries to keep anything religious out of the public sphere as much as possible. (Photo: Eiffel Tower in Paris, 20 Nov 2007/Mal Langsdon)

The bankers, lawyers, government officials and Islamic finance specialists trying to get Islamic finance off the ground in France speak publicly about the bright prospects they see for the market. France has the biggest Muslim population in Europe at over five million. The government is pushing the idea hard. There is a huge need for financing of future projects.

But privately, many admit that French companies and banks may hesitate to do anything that uses the label Islamic as this could highlight sensitivities over social and cultural divides. Ever since the French Revolution, France has upheld the idea that its people are all individual and equal citizens and not members of regional, ethnic or religious minorities. Stressing membership in a sub-group is considered divisive. The French frequently point to the multicultural approach taken in Britain and the United States as the source of political and social problems — such as ethnic or religious “ghettoisation” and “identity politics” — that they want to avoid.