In his lecture last Monday, Taha Abdul-Basser, chaplain of the Harvard Islamic Society and doctoral candidate in religion at Harvard, proposed a solution to the current economic crisis that is not often considered: follow Islamic law, known as Shariah.
The lecture, entitled "Islamic Finance: Islamic Solution to Global Financial Crisis," was part of a series of events scheduled for "Islam in Conversation Week," organized by the Muslim Students' Association (MSA) and the chaplain's office. The theme is "Living Shariah in the Contemporary World."
"We want to show that Islam is not limited to spirituality or one's relationship with God—even though that is an extremely important concept—but also, how our relationship with humanity is," said Sister Marwa Aly, the Univerity's Muslim Chaplain. "Islam is a way of life, so it has a stance on the environment, on economics, on politics, on social justice and even on entertainment."
Shariah is a frequently used term, but is often employed without a full understanding of its meaning. Students in the MSA hope that the talks given throughout the week will encourage dialogue and help people more fully understand Shariah.
"Hopefully, organizing a lot of talks about Shariah will help people better understand what it means," said MSA member Jourdan Hussein '11.
Islamic finance is based on Shariah, which includes writings from the Qur'an and from Muhammad, and the scholarly teachings that inform Islamic law. Its underlying precept is the illegality of any usury—transactions that demand interest from a person receiving a loan.
It also states that all financial transactions must be done with caution, and prohibits directing the flow of money itself when no tangible assets are involved. Thus, under an Islamic system, the complicated packaging of mortgages partly responsible for the current financial crisis would never have occurred
"The speaker was really informative and had a great background with which he supported many of his ideas of how Islamic financial policies and ideas could be beneficial to the falling economy today," said Raghu Appasani '12. "I am glad I [attended] because I did not even know that there was a whole separate Islamic financial sector that was so successful."
Islamic banks use mechanisms that do not charge interest, which include "lease to own" agreements and diminishing equity balances, in which two partners would take out a mortgage with one eventually buying out the other. These financial systems exist in the Muslim world, such as Saudi Arabia and Malaysia, but also increasingly in the West, most notably in Great Britain.
Although Abdul-Basser conceded that the Islamic system is comparably smaller, these Islamic institutions have better withstood the financial crisis because they never undertook the risky mortgages and then resold them.
Abdul-Basser said that many financial systems in the world need structural changes, instead of continuing the practices that led to the crisis.
The reforms Abdul-Basser mentioned in his lecture had all been suggested by secular economists—Islamic reforms need not be necessarily religious. He cited Joseph Stiglitz, a Nobel Prize-winning economist at Columbia University, and Nouriel Roubini, a professor at New York University who predicted many aspects of the financial crisis.
His suggestions, based on Stiglitz' work, included creating incentives for executives that reward thinking beyond short-term gains to form financial product safety and financial system stability commissions to oversee financial companies and prevent excessively risky loans, along with other regulations to limit excessive borrowing. Abdul-Basser also suggested briefly nationalizing banks in order to reform their practices, before returning to privatization.
"I thought that if what the lecturer discussed could be somewhat secularized, it seems as though it could absolutely work." said Phil Ross '12, who attended the lecture. "The lecturer really got his opinion across that restructuring our system to encompass certain facets of Shariah-compliant banks would go a long way towards stopping the bleeding that was caused by excessive lending."
"Islam in Conversation" events, which started on Wednesday, will continue through Feb. 27.