Sharia Finance and Ceylon tea

Roshan Madawela

Whilst on a recent trip to Amman, Jordan to attend a workshop on Islamic Real Estate finance, I was fortunate enough to meet the highly acclaimed Prof. Archer. Many topics were covered during an exclusive interview over a cup of Ceylon tea.


Professor Simon Archer, based at Surrey University, Guildford is currently residing in France. He started out in Philosophy, Politics and Economics at Oxford University, before qualifying as a Charted Accountant. He joined Price Waterhouse in Paris where he became a partner in charge of Management Consultancy Services. His specialized areas of research are in international accounting and Islamic financial institutions. During the recent IREF conference held in Amman, Jordan, I had the pleasure of discussing his opinions on a wide range of issues both inside and outside the Islamic finance sector, over a cup of Ceylon tea.

Having explained that I was asked to conduct this interview on behalf of the newly launched Islamic Finance Today (IFT) magazine he generously shared his opinions on what the current gaps of coverage are in the Islamic Finance sector magazines and publications. Professor Archer stresses the need for a publication that dares to critically analyze all players in the sector that includes scrutiny of their annul reports, web sites and any other matters of disclosure. He firmly believes that such critical articles need to be concise and hard-hitting in order to distance themselves form the some of the sycophantic material that is currently circulating. Citing a famous figure from the past, Abraham Briloff, the Jewish writer who could ‘tear into’ annual reports and other company material with surgical precision, cutting through excessive latitude. Archer noted that the Islamic Finance Today magazine should push for greater transparency in the sector as this appears to be the need of the hour. It is worth noting that a number of rating agencies have thus far down-graded Islamic Banks due to poor quality reporting.

Within moments into the discussion one can note that the Professor is highly clued up on the sector and has a fully packed picnic basket of Islamic Finance insight. So what motivates him to continue serving in the Islamic Finance Sector as a Christian scholar? Firstly, he gives his thanks to Professor Rifat, Chairman of the Islamic Finance Services Board (IFSB) from whom he says he has learned a great deal from and who still continues to remain as a close friend. He is currently a consultant to the IFSB and has authored and edited numerous publications related to accounting including the Miller International Accounting Standards Guide.

Secondly, he explains that he is motivated by a deep sympathy for devout religious believers who are prevented and exclude from the prevailing financial system due to the prevalence of interest that is detested by Muslims. Moreover, from the free market perspective, he asks why a legitimate demand for specific financial products cannot be met within the existing financial services framework of a country. Here he refers to an article written by Dr. Shariq in the last issue of IFT where the writer outlines the position of the Indian government on Islamic Finance, describing it as a completely unreasonable stance that appears only to pander to hard-line Hindu fundamentalists. His position is clear and based on a strong belief in the role and responsibility of the markets to meet the demand for Islamic Finance. However, on deeper inquiry, it is clear that he is also motivated by the ‘ethical finance’ concepts that underpin the IF sector and its true spirit.

He explains, in Christianity, believers take a different view of interest that most Muslims. Taking credit cards for instance, the Christian will agree that it is wrong to get exploited by interest but would use the credit card moderately whilst avoiding the accesses that would lead to debt traps. The same applies to alcohol where the Christians will denounce drunkenness but will not hesitate to enjoy a glass of wine. He draws further parallels with dress code. He believes that it is important for a women to dress modestly but will stop short of advocating the compulsory donning of the hijab or burka as some schools of Islamic thought do. However, he considers the Turkish ban of the Hijab in public office as unreasonable and also gender biased as a man can express his religious beliefs by sporting a beard inside public offices. However, Western society stands at the other extreme and has somewhat lost its way in this regard. In our present society, all limits on modest dressing appear to have been lifted. Yet he does not advocate a hard handed policy to deal with immodesty but thinks that a lighter approach based on humor would be more fruitful.

Islamic finance is in ways more akin to this light-handed approach in its sharia rulings. For instance, it is permissible to own shares in a company that has below five per cent turnover generated from haram activities. For instance, it is ok to invest in an Airline that sells alcohol so long as the sales do not exceed five per cent of turnover according to current rulings. He also notes that Islamic finance focuses on raising money for investment and not consumption which is good for the overall health of the economy.

Conversely, he is critical of those that apply the Sharia without recourse to the spirit of the message. He points to a number of examples of where the Sharia is interpreted in a manner that works against women whereas the Messenger of Islam, peace and blessings be upon him, was sent to liberate women from pagan practices and proclaim mercy to all mankind.

Here, his beliefs as a Christian are again distinguished by his complete acceptance of the Profit Mohammed (PBBUH). He notes that many Christians, particularly in the West are ignorant of the fact of the final messenger and that is one of the problems that is leading the world towards conflict. At one extreme, you have the neo-conservative camp in the US that refuses to believe in Islam’s messenger. At the other end, a number of schools of Islamic thought are backward in their thinking. It is worth noting that the decline of the Islamic caliphate, represented in its final phase by the Ottoman Empire, was initiated by a period of close-mindedness that accelerated the down-fall. In this connection, the Islamic finance sector can play an important role, making up for 300 years of backwardness in order to catch-up with the ‘golden era of Islam’.

As an academic with firmly embedded roots in the UK, Professor Archers sees possibilities for strengthening the UK’s foothold on Islamic Finance related study programs. Already he has initiated a qualification in association with a Lebanon based institute and one of London’s leading finance education institutes. The UK is growing with the Islamic Finance sector as it has a legal system that is comparatively flexible and can accommodate the changes as compared with say the French legal system that is constrained by rigid laws. The French have more than twice as many Muslims living in the country but the grass roots knowledge is low, resulting in low levels of demand for services. The UK system has allowed for changes in tax laws and other regulatory changes that have not yet taken place in continental Europe. In this connection, continental Europe needs to ‘wake-up to the ideas’.

So can we expect to hold any IF conference in Iraq in the near future? Unlikely except perhaps in the north according to Archer. The terrible mess in the country is caused by US policy and years of rule by Saddam Hussein. Here I point out that the latter was voted the BBC World Service polls most popular leader in the early nineties and that most Iraqis, who did live in considerable prosperity up until the first US invasion, still hold him is high esteem. Moreover, his popularity extends out on the streets from Bali to Casablanca. He does not agree.

This interview was made possible due to the sponsorship of the Islamic Finance Today magazine and it is hereby published with their kind permission.

Copyrights RIU (2007)