Shariahnomics 2 – Islamic finance during the crisis
I discussed the theory of Islamic finance in the last post on this subject. Here is a nice summary of the difference between Islamic and conventional banks’ approaches to risk.
The above is from work done by Maher Hasan and Jemma Dridi, two IMF economists, on how Islamic banks performed during the global financial crisis (and the period leading up to it). In a 2010 working paper, they use bank level data from 120 Islamic and conventional banks from eight countries* over the period 2007-10 to explore why Islamic banks might have performed differently during the crisis.
Shariahnomics — Islamic finance
In the last half decade of Hosni Mubarak’s rule, the Egyptian economy grew by healthy 5-7% a year. Economic growth dipped to less than 2% a year after the revolution. Currently, Egypt is on the brink of economic meltdown, and is negotiating an IMF rescue package. The IMF package will probably involve tax reforms, privatisation, trade liberalisation, removal of subsidies, you know, the standard Washington Consensus neoliberalism. The Muslim Brotherhood run government of Egypt does not particularly want to do any of these things. As I speculated over a year ago, economic problems are giving anti-Brotherhood factions a political opening.
But this post is not about Egypt.
Islam is the solution — the Muslim Brotherhood used to say. It will be interesting to see whether someone issues a fatwa declaring the IMF package as ‘Islamic’ or Shariah-consistent. But as far as I can tell, the two things most commonly associated with Islamic economics — zakat and Islamic finance — have very little to say about Egypt’s current problems.
I’ll do a separate post or two about the origin of Islamic economics. And there will be a post on zakat. Over the fold, some thoughts on Islamic finance from the perspective of a mainstream economist (who may or may not be a believer).
On the garment sector’s woes
The scene of hundred something young men women locked in while fire and smoke start choking them. This is horror and sadness. When I hear factory mid management started locking the gates after fire alarm goes off — I get angry. Then when I hear the prime minister immediately puting the blame, without any investigation, on Jamaat-Shibir — I become speechless in disbelief.
A friend wrote to me thus after the fire at Tazreen garment that killed over a hundred workers on 25 November. It was followed by a lot of emotional facebook status updates, blog posts, newspaper op eds, and shouting heads in TV.
Well, it’s now official — it was ‘sabotage’. So that’s that, eh? Well, not quite. The official recommends taking legal actions against factory owner and nine mid-level managers for gross negligence that contributed to the tragedy. Is there anything more to be said? What about another facebook status update about ‘evil capitalism’?
Over the fold are some thoughts I haven’t seen/heard expressed. And I promise, there is no infantile, emotional outbursts about ‘greedy killers’.
Corruption in America
I was going to write this post in October, as part of the fifth anniversary of the blog. But ‘real life’ got in the way. This piece by Shubinoy Mustofi on fire in a garments factory killing over a hundred workers reminded me about the subject, so here we are.
Corruption is our biggest problem. If not for corruption (or corrupt politicians/bureaucrats/businessmen/army officers), we would be a rich country. – How often have you heard statements like this? I often here things like this from Bangladeshis living in rich countries of the west, which is quite ironic because of the history of corruption in these countries.
Let’s take America, for example, which, Martin Scorsese tells us, was born in the streets.
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