In 1976, the Kwame Nkrumah University of Science and Technology (KNUST), Kumasi, celebrated its silver jubilee and Lord Bowden, then Vice-Chancellor of the University of Manchester Institute of Science and Technology (UMIST), was invited to give a series of lectures in the Great Hall of the university as part of the programme to mark the occasion. At the time, the major international economic concern was rapid inflation and Lord Bowden was asked to recommend a solution. He said that the answer was given in the Quran: anyone who borrowed a camel should in due time return a camel to the lender. Now thirty seven years later, it has been announced by the British Prime Minister, David Cameron, that the City of London is to be the first non-Islamic centre to issue Sharia bonds (sukuk) as part of a plan to give London a major role in international Sharia banking. Inflation is no longer the priority economic concern, so does the Quran provide an answer to all of modern banking's woes?
There is no doubt that in the early years of the twenty-first century the Western capitalist banking system got seriously out of control, and, but for the timely intervention of governments, would have collapsed, with serious consequences for the world economy. The system was driven by greed and its rapacious methods were not only unethical but often illegal. Banks and individual bankers are being punished for their illegal activities, but many outside of banking think this is not enough; the system needs to adopt a strict new ethical code and should turn to the great religions for guidance.
The late English philosopher, Harry Charles, used to say that the principles of individual human conduct are to be found in Christianity, but one must turn to the Quran to find the principles guiding the conduct of communities. Banking is a communal activity, so Charles would have advocated looking to Islam for its fundamental guiding principles, and as Lord Bowden pointed out with his camel for a camel, one essential is the absence of interest.
According to the Quran, money has no intrinsic value but can generate benefit when invested in human activity. When a Sharia loan is invested, the benefit may be shared by the lender and the borrower, and this benefit will reflect an increase in goods or services enjoyed by the community; wealth will have been created. On the other hand, playing games with money alone, such as charging interest on loans or buying and selling securities, creates no new wealth and merely reduces the value of money, which as Lord Bowden implied, is the process of inflation.
Islamic banking is to be welcomed to London and to other Western financial centres. It is to be hoped that the Islamic bankers will hold firm to their ethical principles and so conduct their activities that the whole international banking community will be persuaded to reform in their image.