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On the other hand
Joined: 19 Apr 2003
Location: I walk along the avenue
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 Posted: Thu Apr 22, 2010 11:41 am Post subject: Islamic finance in Korea |
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| Lee Yul-hee, the head of the Islamic finance team at Korea Investment & Securities, a local securities firm, has to fumble for the right words whenever Muslim investors ask when they will be able to buy Islamic bonds issued by Korean companies. Have the promised regulatory changes been made yet? |
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�Several Protestant church groups have lobbied against the bill, claiming about 5 percent of the money involved in sukuk sales is being used for terrorism-related funds,� said Na Seong-lin, a Grand National Party lawmaker and a member of the National Assembly taxation subcommittee that is considering the sukuk bond proposal.
Na said he found the allegations �absolutely ridiculous� and �lacking any evidence.� But political considerations ahead of local elections in June are making it hard for lawmakers, especially those with strong backing from Protestant church groups, to deal with the sukuk legislation, said Na and several National Assembly aides who did not want to be named.
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I know nothing about Islamic finance, beyond that it forbids the charging of interest. However, given that even this lawmaker from the GNP(a party with heavy evangelical Xtian influence) is skeptical about the protestants' allegations, I am doubting that there is much to the terrorist angle.
And really. Would the inability to access Islamic finance in Korea REALLY put a dent in anyone's terrorist plans? Is it like Joe Blow Jihadist has this great plan for bombing airplanes out of the sky, but dammit, he just can't get the theologically correct loans to start things rolling?
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On the other hand
Joined: 19 Apr 2003
Location: I walk along the avenue
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| Posted: Thu Apr 22, 2010 11:52 am Post subject: |
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| Apparently, Korea already buys oil from Saudi Arabia, so if they're worried about Korean money ending up in the hands of Muslim extremists, well... |
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Fox
Joined: 04 Mar 2009
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| Posted: Thu Apr 22, 2010 4:24 pm Post subject: |
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| The whole concept of Sukuk confuses me. It's clearly just a giant technicality meant to get around religious law, but how can someone who believes in the God of Islam to a sufficient degree that they're willing to take religious law seriously also believe they can use loopholes in the system to evade the spirit of the law in question. It's like the Jews who use those automatic buttonless elevators to circumvent the Sabbath rules; how can you take these matters so seriously that you're willing to build a special elevator in response to them, but view them so frivolously that you think evading the spirit of the law in question via a loophole suggested by liberal religious scholars is okay? |
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bucheon bum
Joined: 16 Jan 2003
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| Posted: Thu Apr 22, 2010 6:22 pm Post subject: |
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Yeah, Islamic finance is BS. If anyone is interested in it, I wrote a short (5 page) paper on it a year ago for grad school. My focus was on Malaysian banks since they are promoting it pretty strongly.
And some Korean companies actually raise money through sukuks. Good way to bring in FDI from Islamic countries. |
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On the other hand
Joined: 19 Apr 2003
Location: I walk along the avenue
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| Posted: Thu Apr 22, 2010 9:43 pm Post subject: |
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| Fox wrote: |
| It's like the Jews who use those automatic buttonless elevators to circumvent the Sabbath rules; how can you take these matters so seriously that you're willing to build a special elevator in response to them, but view them so frivolously that you think evading the spirit of the law in question via a loophole suggested by liberal religious scholars is okay? |
In high school, I attended a conference where a Jewish woman talked about her faith, and about how some orthodox hire gentiles to operate electrical systems for them on the Sabbath. I raised the same objections that you raised here, but she didn't seem to think there was a contradiction.
I guess for some people, following the letter of the law is an end in itself, regardless of the spirit. So legalism becomes sort of a cultural icon, like food and music is for other cultures. I think the contradiction would be more pronounced if we were talking about Christians, who are a more evangelical faith, and hence believe that EVERYONE should convert. In that case, it would be like "Well, we really want you to follow our rules, but as long as you're not following them, would you mind breaking them in order to help us out?"
Bucheon Bum wrote:
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| Yeah, Islamic finance is BS. If anyone is interested in it, I wrote a short (5 page) paper on it a year ago for grad school. |
Well, I'm interested. Fox said that "Islamic finance is just a giant technicality to get around religious law", by which I assume he means the prohibition on interest. In what way is it a technicality? Is interest actually being charged, but just under a different terminology? And if so, how does that work? |
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mises
Joined: 05 Nov 2007
Location: retired
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| Posted: Thu Apr 22, 2010 9:56 pm Post subject: |
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| You can charge for a loan but just not with the mechanism of interest. |
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On the other hand
Joined: 19 Apr 2003
Location: I walk along the avenue
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| Posted: Thu Apr 22, 2010 10:10 pm Post subject: |
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| mises wrote: |
| You can charge for a loan but just not with the mechanism of interest. |
I assume the fee for the loan varies with the amount of money lent, then. So if I lend you 500 dollars, I charge a fee of(let's say) fifty dollars, calculated up front, as opposed to over a period of time, as is the case with interest.
But does the amount of the fee also vary according to how long you're planning to take in paying back the loan? If so, then I guess I can see how that basically amounts to charging interest. |
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The Happy Warrior
Joined: 10 Feb 2010
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| Posted: Thu Apr 22, 2010 10:24 pm Post subject: |
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| On the other hand wrote: |
Bucheon Bum wrote:
| Quote: |
| Yeah, Islamic finance is BS. If anyone is interested in it, I wrote a short (5 page) paper on it a year ago for grad school. |
Well, I'm interested. Fox said that "Islamic finance is just a giant technicality to get around religious law", by which I assume he means the prohibition on interest. In what way is it a technicality? Is interest actually being charged, but just under a different terminology? And if so, how does that work? |
I'm curious, too. I've only heard of it before, I had no idea it was to evade usury. |
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Fox
Joined: 04 Mar 2009
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| Posted: Fri Apr 23, 2010 1:01 am Post subject: |
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| On the other hand wrote: |
| mises wrote: |
| You can charge for a loan but just not with the mechanism of interest. |
I assume the fee for the loan varies with the amount of money lent, then. So if I lend you 500 dollars, I charge a fee of(let's say) fifty dollars, calculated up front, as opposed to over a period of time, as is the case with interest.
But does the amount of the fee also vary according to how long you're planning to take in paying back the loan? If so, then I guess I can see how that basically amounts to charging interest. |
In my understanding this is incorrect. As far as I'm aware, you cannot accept money for lending money, period. I believe Sukuk circumvent this by involving commodities or other tangible in the transaction, on the side of the issuers of the bond. However, it does so in such a way that the end result is more or less exactly as if you had simply engaged in a normal bond transaction.
However, it's worth noting my understanding of Muslim law on this matter tracks back to casually studying Islam for a while in college. Bucheon Bum can no doubt explain it in greater depth, and if I've made any mistake in my characterization of what's happening here I hope he'll correct it. |
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bucheon bum
Joined: 16 Jan 2003
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| Posted: Fri Apr 23, 2010 5:25 am Post subject: |
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I actually only devoted one paragraph to sukuk. Most of my paper was devoted to various savings plans (since there is a lot of them, all of which are pretty similar).
Malaysia is one of three countries in the world to issue Islamic bonds called sukuk (Bahrain and Qatar being the others). Sukuk are similar to Islamic finance�s mark-up tools: they are supposed to be used to obtain specific assets. A company needs to be able to tell an investor what assets will be purchased by the funds raised by the sukuk. Alll a company has to do is determine what a valid rate of return should be, and then apply an appropriate �rental� price for the sukuk.
So basically a company says, "With this money, we will be purchase _____ and build this ______." You, as the sukuk buyer, supposedly "own" whatever is bought through the sukuk and therefore rent that equipment, building, or w/e to the issuer of the sukuk. In reality, that rent is your rate of return, and when the sukuk matures, the company decides to actually buy what you've rented to them- for the original price of course (even though, in the case of equipment, it is a worth a lot less than before, and in the case of property, perhaps more). Make sense? |
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