A recent poll of Canadians in the Globe and Mail asked the question.
Do you think Ottawa should approve applications it has received from Muslim groups looking to set up so-called sharia banks that would operate within the structures of Islamic law?
The response was a resounding 82% no.
There was a similar, albeit much more controversial debate over a year ago. The debate was over the introduction of Sharia Courts in Canada. Some Muslim groups wanted to settle their issues in their own Islamic Courts. While I was adamantly against Sharia courts, I thought the fact that Canada entertained the issue showed how free and beautiful a country we really are.
The entire concept surrounding Sharia banks is that charging interest is illegal for Muslims. There are ways around this, such as charging for services instead of charging interest. Putting down a flat fee for borrowing that is called something other than interest. In fact, we already have banking concepts in Canada that are in line with Sharia law.
"No interest for a year?"
"Don't pay a cent event!"
Do such slogans sound familiar?
Yet the knee jerk reaction of Canadians before even analyzing the facts is to give a resounding "No!" to the issue.
My deeper and more analytical opinion of the entire Sharia banking concept suggests that everyone discussing it, especially Muslims keen on the concept in Canada are missing the bigger picture of what "no interest" might actually entail.
As much as you fiddle around with numbers, calling them charges and fees, what it comes down to in the end is basically the same thing. People are paying interest on a loan disguised as other fees.
In my opinion, the entire idea of "no interest" is a Macroeconomic concept which is much harder to grasp than the Microeconomic concept everyone is trying to fiddle around with to appease Muslim groups.
How can a society charge no interest?
Well, under Canada's current fiscal policy, it's impossible. If I loaned someone money at no interest, after a year I'd be worse off due to inflation.
But, what about a deflationary economy where the reverse happened? The Macroeconomic concept seems almost too far fetched to grasp. It's a concept which seems like going backwards when modern train of thought goes forwards. But it is not necessarily impossible and would be an interesting experiment. Japan briefly had zero interest in a bid to jump start the economy. Interest rates are still some of the lowest in the world over there.
A deflationary economy would require is fiscal restraint, something pretty much every government in the world lacks, including most Islamic countries who are some of the least fiscally responsible.
I could debate this further, bring up pro and con examples. Muslims say the Koran is the divine word of God. They also say that there are meanings hidden within it that are still misunderstood. I think this may be one of them.
On the other hand, if it makes people happy to pretend they are not paying interest when they actually are, then what the hell, let them live in a world of service charges and late fees. Two plus two still equals four at the end of the day.