Since the start of the global economic crisis in 2008, financial education has been under increased scrutiny from those dissecting what went wrong. Who, after all, had trained the perpetrators of the crisis? Were the “masters of the universe” ever taught about ethics? And if not, why not?
Training in Islamic finance, which was already gaining in popularity pre-crisis, has grown from strength to strength, as it has developed a reputation as a haven of common sense and relative security in uncertain times.
At least two of the causes of the crisis – gharar (risk) and gambling – are banned by sharia (Islamic law).
“Several of the ethical lapses which occurred in the financial sector are prohibited in Islam,” says Omneya Abdelsalam, the director of the El Shaarani Research Centre for Islamic Business and Finance and the director of the MSc in Islamic Finance at Aston Business School. “[The crisis] highlighted the resilience of Islamic banks.”
She says that religious beliefs, not limited to Islam, can help leaders be more responsible in business.
“The belief in God, and that absolute ownership of everything is solely His, brings with it an acute level of responsibility and accountability based on the notion of stewardship, which is equally placed on each individual, given that all mankind is believed to be equal before God.
“Such beliefs have a direct and powerful impact on the way business is conducted.”
This “notion of stewardship” or khalifa, common to all Abrahamic faiths but particularly central to Islam, overlaps considerably with corporate social responsibility and transparency, two areas that have enjoyed a post-crisis boom.
Dr Abdelsalam says khalifa manifests itself in Islamic businesses “through fulfilling social responsibility of the business to the best of its capabilities, including fair treatment of employees, care for the environment and customers, and fulfilling the obligation towards shareholders and other stakeholders, through wise use of financial resources”.
At Aston, the Masters in Islamic finance encourages students to think about ethics in every module, be it accounting, contract law, or conventional finance modules.
Cedomir Nestorovic, a professor of Islamic business and management at the Singapore campus of Essec, a French business school, agrees that Islamic finance courses need to address these issues.
He says: “A course about Islamic finance should not be teaching financial techniques alone. There must be a part dealing with religious and ethical issues, explaining the rationale behind the industry.”
Prof Nestorovic adds that elements such as marketing and management must also become more integral parts of Islamic courses, so that they increase their breadth.
One criticism aimed at Islamic finance instruments and banks, or Islamic finance divisions within conventional banks, is they do not embrace the spirit of sharia, but try to find ways round it, in an emulation of conventional finance.
“There is a trend to consider Islamic finance as a ‘cosmetic’ industry where products and services are conventional ones with an Islamic veneer, the only purpose to obtain clearance from thesharia board,” says Prof Nestorovic.
The danger is that Islamic finance, in trying to become more popular, loses its firm roots in religion and ethics.
Some Islamic scholars, adds Prof Nestorovic, “consider that Islam finance does not exist because riba (interest, banned under sharia) is embedded in contracts, even if it is not labelled as such”.
“There is also a certain disagreement between Islamic countries about the definition of a tangible asset and some accounting principles.
“All in all, there is a gap between what is taught and realities for a certain number of observers,” says Prof Nestorovic.
G20 Summit: what the world's leaders say - Daily Telegraph
"We [China and Japan] agreed to seek further efforts from the eurozone, Germany in particular, as stability in Europe is indispensible. We share the view that it is important to strengthen IMF lending capacity and I feel that China may mention its specific contribution soon.
"To resolve Europe's problems in the medium to long term, they should take some time to create a financial scheme to restore the health of each bank and stabilize the finances of each country. It's important for Europe to take time and make further efforts to resolve its own problems. Japan and China agreed to support such efforts through the IMF."
Min Zhu Guangyao, Chinese vice-finance minister
"China has faith in a strong and prosperous euro zone ... China believes the EU has the capacity and wisdom to overcome the sovereign debt crisis....A strong, unified euro zone is good for Europe, good for China and good for the world economy...We believe that Greece should stay in the euro zone to uphold the stability and integrity of the euro zone and Europe."
Angel Gurria, secretary general of the OECD
"Europeans have to display the awesome firepower that they have at their disposal.
"The fire is in Europe right now and it is affecting the system as a whole. It is no longer just a European issue ... One of the problems we've had in Europe so far is that the instruments are there but the countries have not decided for different reasons to use them to the fullest."
Gurria said Greece's new government is likely to seek to renegotiate the terms of its IMF/EU bailout package. "It is a scenario I see likely and if that is the condition present for Greece to stay and then move on, I would say it is probably something that should be attempted."
Jim Flaherty, Canadian finance minister
"The situation is not that we're dealing with impoverished countries here ... We're dealing with some of the wealthiest countries in the world, which is quite different than the situation that the IMF normally deals with," Flaherty told Global Television.
"The reality is that we have non-European G20 countries that have a lot of hesitation in dedicating resources to the wealthy European countries."
Agustin Carstens, Mexican central bank governor, on the Greek election result
"It's news which could be welcomed by the market."
Market Chatter - Corporate finance press digest - Reuters
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"Angry" Money Gives Funding Edge to GOP and Romney - RealClearPolitics
There has been a lot of wailing and gnashing of teeth as, in the spring, it appeared that forces supporting Mitt Romney would be able to raise about as much money as those supporting Barack Obama. There's even more now that it seems likely that the pro-Romney side will raise and spend more money than the pro-Obama side.
Four years ago, the Obama forces heavily outspent those supporting John McCain. The Obama campaign had enough money to target -- and carry -- heretofore Republican states like North Carolina and Indiana.
That experience made the Democrats spoiled. The prospect that the other side would have as much money as they do struck them as a cosmic injustice. The prospect that it would have more -- heaven forfend!
They like to blame this situation on the Supreme Court's 2010 Citizens United decision, which allows corporations and unions to spend money on political speech. They did so even after their defeat in the June 5 Wisconsin recall election, in which Citizens United had no effect because fundraising was governed by state campaign finance laws.
What's really interesting is that, if current projections are right, this will be the third election in a row in which the party holding the White House will be outspent by the opposition.
In 2004, incumbent Republican George W. Bush's side was outspent narrowly by those opposing him and favoring Democrat John Kerry. One reason is heavy spending by billionaire George Soros, about which we heard few complaints from those now decrying the billionaire Koch brothers' spending as a threat to democracy.
In 2008, Barack Obama broke his promise to rely on public financing and raised and spent about $750 million. About half as much was spent on behalf of John McCain, who accepted public financing.
Now, despite the clout any incumbent president has, Democrats are likely to be outspent by Republicans.
All of which tends to undermine the case made for campaign spending limits. In the 1976 Buckley v. Valeo case, the Supreme Court said limits on campaign contributions were constitutional. They didn't violate the First Amendment guarantee of free speech because they were intended to prevent corruption or the appearance of corruption.
In effect, the Court said that you can abridge First Amendment rights in order to limit "smart money" contributions. Smart money, by definition, goes only to incumbents and candidates with a good chance of winning.
But in our last two presidential elections and apparently in this one, the smart money going to the party in power has been outweighed by "angry money" going to the party out of power.
The billionaires and the many, many others fueling the anti-Bush coffers in 2004 believed that the 43rd president had lied America into an unjustified and probably unwinnable war. I didn't agree, but, hey, it's a free country -- and people should be free to try to elect the candidate of their choice.
In 2008, Barack Obama raised a lot of "hope" money and, since it looked like a Democratic year, a lot of smart money. But angry money from Bush-haters helped propel his total take to record levels.
This year, there's no doubt that the billionaires and the many, many others contributing to the Romney campaign and pro-Romney super PACs are angry about the Obama Democrats' policies and believe they will be harmful to the nation.
In sum, angry money seems to be trumping smart money in American politics these days.
Which leads one to wonder whether the increasingly Sisyphean project of restricting campaign contributions is worth pursuing any longer.
The Supreme Court in Citizens United and other cases seems to be edging toward a reversal of Buckley v. Valeo. There may be five votes in favor of giving political speech the same First Amendment treatment as student armbands, nude dancing and flag burning.
That would just restore the priorities of the Framers, who were sure interested in protecting political speech much more than these other things.
American voter turnout has been rising, and so has Americans' willingness to contribute money to political causes they think important. These are not negative trends, though incumbents targeted in attack ads tend to think so.
The apparent Republican edge in spending this year, like the Democratic edge in 2004, was evidence of widespread and heartfelt opposition to an incumbent president. It's a sign of civic health, not sickness.
China money rates slump on flagging loan demand; IRS firm - Reuters UK
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