ISLAMIC FINANCE: SOME ELEMENTARY DEETS.

“When the dinar and the dirham were first minted in the form of metal coins, Iblis the accursed held them happily. He then placed them over his eyes and said to them, ‘You are the fruit of my heart and the delight of my eyes; through you, I will drive people to become tyrants. I will cause them to become disbelievers and lead them to Hell. . .”

-         Ibn Abbas

In my interactions involving economic systems, I have consistently been asked to throw light on an enigma that is Islamic Finance. People often tend to condemn the discipline (along with Hawala) as sinister.

Islamic finance, at its roots, is about making finance Sharia compliant. The fundamental difference between the discipline and conventional western capitalism lies in the philosophical understanding of the nature of money. Today, money itself is perceived as a commodity; financial institutions enter into specious deals that have no rooting in the real economy or involve assets over which they have no ownership or claim. Traders are free to take speculative positions and earn emolument. Complex instruments birthed through financial engineering like derivatives or swaps; or the latest contrivance by central banks, dubbed Quantitative Easing or QE involves creating money out of nothing.

Sharia sees money, merely, as a store of value with no inherent, intrinsic worth. A twelfth-century thinker, Abu Hamid Muhammad ibn Muhammad Ghazali, in an nalysis of money said, ‘[Allah had created Dirhams and Dinars] so that they may be circulated between hands and act as a fair judge between different commodities and work as a medium to acquire other things’, and that, ‘whoever effects the transactions of monay is, in fact, discarding the blessings of Allah, and is committing injustice, because money is created for some other things, not for itself.’. It is a means to an end, a medium of exchange, and not an end in itself. It cannot be created from thin air, and is devised to facilitate real economy transactions; and in that spirit Sharia outlaws transactions aimed at earning a profit out of purely financial transactions, or usury. This brings us to what is widely thought to be the definition of Islamic finance: Banking without interest or riba. A wanting definition.

Islam was not alone in its admonition of interest. The Church had also placed an injunction (before it was lifted) against usury. Though many look at Islam’s ban on riba as an appurtenance of backwardness, I think it holds some rationale: If investing money in interest bearing instruments in prohibited, investors will be forced to turn their capital to real-economy projects as hoarding is considered as a waste of resources (assuming the owners of capital are rational.). Once again, Ghazali chips in with all too prescient words on investors: ‘it becomes easy for him to earn money on the basis of interest without bothering himself to take pains in real economic activities. This leads to the hampering the real interests of humanity, because interests of humanity cannot be safeguarded without real trade skills, industry and construction.’

But, what may be considered as a real economy transaction? It is a transfer of ownership from one person (the seller) to another (the buyer). As per Islamic jurisprudence, ownership is desideratum for a trade to take place. One cannot sell what one does not own. A principle addendum is that the seller must be in possession of the commodity involved in the trade; that the seller cannot sell and profit from something the risk of which she does not assume. This is a vital proviso to ensure accountability and prudence in any trade. By assuming commensurate risk, participants may be weaned off harum-scarum actions.

Islamic scholars have enshrined a manner in which capital may be deployed to earn ‘permissible profits’. At the core of all such methods lies the establishment of a risk sharing mechanism by which an investor partakes in the profits earned and the losses incurred by the project which was the principal of the investment.

One large scale project that comes to mind is that of the social banking experiments by Islamic states starting in the 1950s—especially in Egypt and then Pakistan. The most notable of these experiments was conducted by Dr. Ahmed Elnaggar in the Egyptian town of Mit Ghamr. Mit Ghamr was a small and sparsely populated town on the banks of the Nile. The Mit Ghamr Savings Bank transfigured the conventional ‘creditor-debtor’ relationship to a more Sharia prudent ‘risk-sharing’ relationship. No interest was paid on deposits nor any collected on loans made; the depositors were investors who were partakers in the profits earned by their investments, and the bank only engaged in what would now be called ‘Real-Economy’ transactions. The Mit Ghamr Savings Bank functioned more as a vehicle for savings and investments and less as a commercial. The Savings Bank was later incorporated into the Nasser Social Bank—which was also ‘interest-free’. (This is one of many instances of Islamic finance in action in the 20^th and the 21^st centuries. There exist many other instruments, most notable of which is the revolutionary Sharia compliant bond or sukuk. But, I must reserve a discussion on this front for another time.)

Financial markets today offer a motley array of instruments that, according to Islamic scholars, amount to gambling. A lot of transactions involve speculating on the movement of various markets. By entering into such trades and employing the various strategies available to the modern trader, investors are able to earn a positive return even from a market in decline. Such trades have no grounding in real economy transactions. As the financial crisis of 2008 has sufficiently clarified, various financial products—like Collateralized Debt Obligations and the notorious Credit Default Swap—not only brazenly courted uncertainty, but also marred transparency that is vital to the success of any transaction.

Islamic finance is steeped in, and arises out of the concept of equality and justice because Sharia seeks to extend it to every aspect of human interaction—even economics and finance. It is a fast growing industry and may well prove to be a beacon of virtuosity in a world mired by crony capitalism.

NOTE:

The opening quotes and the words of Ghazali have been borrowed by me directly from a published work—Heaven’s Bankers by Harris Irfan—that introduced me to the world of Islamic finance, and has played an indispensable and vital role in assisting me develop the ideas that I have presented in this article.

  

About the Author: 

Abhishek Anirudhan is a student of Economics at Fergusson College, Pune. His areas of interest include Money, Finance and International Relations

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The Bear vs The Bird: Turkey shots down Russian aircrafts over Syrian airspace

               The Islamic State, also known as the Islamic State of Syria and Iraq or Daesh, is now deemed to be global threat, that has effectuated a military coalition between the political giants (The USA backed by North Atlantic Treaty Organization (NATO) Countries and the Russian Federation with its trusted ally Iran) of the world to counter radical fundamentalism. China, with its oil interests in Syria, is also expected to join the fray on the side of Russia. Most people would suppose that this is a global effort of good (the world) against evil (ISIS), but this view would overlook the close proximity this platform has brought two volatile and powerful forces into, and the precarious balancing act being carried out in the Levant region. With NATO and Russian forces on the ground, a direct military confrontation between the two is almost inevitable and even a minor accident like a stray missile from a drone or bomber may result in the beginning of the Third World War. That is exactly what almost happened on the 24th November 2015. The interception and shooting down of a Russian aircraft by the Turkish Airforce had pushed the world on the brink of a full-scale conflict, with tensions and emotions running high. But to conclude whether the situation will build up to World War III, an analysis has to be made on the factual situation, legal implications, controversies and the stand taken by the stakeholders in this incident.

Russia has invaded Turkish airspace right since its advent into the Middle Eastern crisis. Prior incidents of such acts have prompted sharp reactions from Turkey, with warnings strongly inclining towards a shoot down. However, comments made in fiery bursts of sovereignty turned to actions when a Russian Sukhoi Su-24 long-range bomber deployed to target ISIS within Syria was intercepted and shot down by two Turkish F-16 fighter jets, on account of violation of airspace. The Su-24 was cruising at 6000mts when it was said to have been hit by Air-to-Air Missile, causing it to crash in the Jabal Turkmen mountainous region in rebel-held Latakia Province, Syria. The jet was said to have been flying over a three-kilometer-wide Turkish territory that indents into Syria. However, this claim is highly debated in the international circuit as Russia repeatedly denies Turkey’s claim of violation of airspace. 

          This, apart from being a major hurdle in the global effort against IS, has resulted in confrontation of NATO and Russia, which is something that the world has managed to avoid from World War II, all the way through the Cold War and up to this very day. Though incidents like the Cuban missile crisis come to our mind when we think of a stand of between USA and Russia, the current incident may have much more severe implications. With Russia and the United States having 90 per cent of the world’s nuclear arsenal, which is made available to other countries through treaties like the Nixon Doctrine, (by which America shields its allies with a nuclear umbrella) the stage is set for a global conflict, if aggression increases.

          The invasion of airspace is a violation of the territorial rights of a state. Such incidents happen on a daily basis and reports by the news agency R.T. show that Turkey itself had violated Greek airspace 2244 times in 2014 alone.Though there isn’t any international nomenclature providing a legal framework for violation of airspace; The Chicago Convention of 1944 is referred to while dealing with the subject. Though being very vague about airspace violation and just a slight modification of the principals found in the Paris Convention of 1919, this convention strongly codifies a pre-existing principal of customary international law i.e. that every state has complete and exclusive sovereignty over its airspace which also extends to the air over its territorial waters. This convention grants the Right of Innocent Passage to any civilian or commercial flight between two contracting countries and the only part dealing with violation of airspace is Section 3, which limits the right only to civilian aircraft and not to state aircraft, which are aircraft used for military purposes, that could potentially threaten the security of the state they fly over. The only remedy states have in such instances is to knock on the doors of the International Court of Justice, in an attempt to avail whatever little compensation possible along with a humble apology.

The statistics showing global airspace violations are very high; nevertheless such matters get solved within minutes between the air controllers and the pilots, with very few interceptions and shoot downs, which occur at extremely rare occasions. Keeping in mind what petty a crime violation of airspace is considered to be, instances of such isolated strikes are driven by rather covert intentions, much more serious than mere territorial trespass for a few minutes. For example, the USS Liberty, a US intelligence and reconnaissance vessel traversing the Israeli coast during the Six Day War between Israel and the Arab countries was bombed mercilessly and heavily by IAF’s Israeli Mirage-2000s, on the pretext of violation of territorial waters. However reputed journalist Antony Pearson, claims in his book called the “Conspiracy of Silence” that the bombing was actually carried out to destroy intelligence obtained by the vessel, which beyond doubt proved that the War that resulted in the illegal occupation of Palestine, was actually a sly operation executed by the Jews to satisfy their vested interests in the region. Another finding that hints towards a cover up is that two Belgian astrophysicists have proven the science of the crash completely wrong. Saying that the Su-24 jet presumed to have been flying at a speed of 980 k mph would have reached central Russian within the five-minute window the Turkish authorities had given it to leave their airspace before shooting it down. According to them, the three-kilometer indent could have been covered by the plane in under a three seconds and the explanation provided by both the sides is wrong scientifically. They don’t claim a political controversy but only rubbish the science, leaving the former to be questioned and commented upon by the international relations fraternity, investigative journalists and controversy theorists.A full attachment of their findings can be located in this footnote.

              Whether the current incident was a result of such a hidden intention? We may never know. Nonetheless, both the blocks have strongly justified their actions. Russia through its premier Vladimir Putin has condemned the attack with vigor and has promised to avenge the attack. In this regard, Russia has imposed heavy economic sanctions on Turkey that could cripple its economy and also published statements accusing the Turks of supporting their fuel industry by buying oil in huge quantities from is controlled oil fields. They have also bombed and destroyed a train of trucks carrying oil to turkey supposedly originating from IS territory.He, however, ruled out the possibility of a war by saying no weapons will be used against turkey but the harsh tone reflects the anger prevailing among the Russian authorities. Turkey defends its actions as well alleging that all its warnings were disregarded. The NATO anticipating aggression called for an urgent meeting to be held at its headquarters in Brussels showing the seriousness of the situation. Such occurrings are frequent on the international platform, it is highly important that states maintain calm and focus on the combined goal of ousting the Islamic State. However further precautions must be taken and tolerance also should be increased in order to develop corporation. Though this event will not snowball into World War III, but could have gone either ways keeping in mind the highly volatile situation. This incident has led me to ponder upon a question, with hot stew bubbling away in Syria, the help being sent by all the states is any good or just spoiling the broth?!

About The Author:

Nazeer Uddin Khan is currently a VIII Semester Student of Faculty of Law, IFHE, Hyderabad. He is an avid follower of International politics. In his past time he attends MUNs and writes about international scenarios. 

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Maharashtra National Law University, Mumbai's 1st Foundation Day Celebration

Mumbai, October 10, 2015: Maharashtra National Law University Mumbai (MNLU) today celebrated its 1st Foundation Day Celebration at Tata Institute of Social Sciences (TISS). The celebration was graced by Shri. Devendra Fadnavis Hon’ble Chief Minister of Maharashtra and Shri. Vinod Tawde Hon’ble Minister of Higher & Technical Education.

MNLU is the first law university for the State of Maharashtra, and is currently offering courses such as BA, LL.B Hons. Five year integrated program and one year LL.M (Legal Pedagogy and Research) program. The university has received a very positive response of around 3000 applications for its opening batch. The classes for this batch are already under way.

Speaking on the occasion, Shri. Devendra Fadnavis Hon’ble Chief of Maharashtra said; “It was always a dream for our government that we should have institutes of national repute for imparting legal education and the government decided to have 3 such institutions at Mumbai, Aurangabad and Nagpur. I am happy that we could start the first one at Mumbai.”

He further announced that the Government of Maharashtra is going to start an International Arbitration Centre in Mumbai as there is a huge scope for it, as most global companies have their presence here. While referring to students he added, “MNLU has offered you an opportunity to be part of a mechanism which caters to the youth of India and I am sure you will use it to the fullest.”

MNLU is currently housed and is temporarily being operated from Tata Institute of Social Sciences (TISS) campus until an independent and new campus for “Maharashtra National Law University Mumbai”. The MNLU students have been offered the same facilities as TISS students. The students also have access to TISS library for their research/study purposes.

Shri. Vinod Tawde Hon’ble Minister of Higher & Technical Education expressed his desire that MNLU should include certain other novel disciplines such as International Maritime law and International Humanitarian law. He also assured the students that MNLU will celebrate its next Foundation Day at its own campus and congratulated them on the launch of its maiden newsletter, “NYUSURETA” (means newsletter in Japanese).

“Starting of a new campus was a challenge. Understanding our concerns and challenges, the support offered by The Govt of Maharashtra and TISS has helped MNLU become operational quickly and has also created a healthy environment for students to pursue their courses. As a pioneer law university in the state of Maharashtra NLU will look forward to produce and groom the talent” said Prof. (Dr.) Bhavani Prasad Panda, Vice Chancellor, Maharashtra National Law University

Speaking on MNLU and TISS association, Dr S Parasuraman, Director, TISS said “We welcome MNLU, the presence of university at the campus will encourage dialogue/ conversations and engagement amongst students from both institutes and also offer opportunity to learn from each other.”He further added that “In a country like India, optimum utilization of resources (sharing attitude) at educational institutes will not only be beneficial to students but also contribute in growth of the economy as a whole.”

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TheWitnessStand: Life @ Amity Law School Delhi

                 It’s been less than a month since college has begun. I am still in the process of getting accustomed to the routine, the people and the culture. But at the same time, when you enter as a fresher, you notice certain peculiar characteristics about the college that you would get so used to in 5 years that it would hardly stand out anymore. For every aspiring lawyer, who doesn’t want to leave Delhi, Amity Law School Delhi is usually their second best option (after NLU Delhi of course). The part that bothers most of the students at ALSD is the stigma attached with the word “Amity”.Almost everyone is aware of the fact that Amity has no procedure to grand a child admission and takes anyone in who is willing to pay the high fee.  It takes a lot of effort for most of us to explain how ALSD is different from the regular Amity Law School Noida. 

We have to explain that we had to go through a competitive examination to get through the college we are in and the only thing that ALSD shares with Amity is its building.  But at the same time, we are lucky enough to share all the facilities and fancy infrastructure that the regular amity provides. Mainly AIR CONDITIONING!! And at the fee of a central university. Situated in some corner of Noida, the 60 acre campus of Amity University is not hard to miss. Its huge red bricked buildings are even visible from an airplane. While everyone raves about the Amity campus, I wasn’t too happy. I crave natural beauty and greenery. Amity University is a concrete jungle! The few trees that they have planted, seem so artificially placed in between the tiled floor. Having a 60 acre campus, one thing is fairly certain. You have to walk. A lot. The walk becomes worse thanks to the Delhi heat. It is common to see people carrying umbrellas with them (at least the girls) , or covering up their entire face with their scarf. In the first week of college, the campus seemed like a maze. Usfreshers seemed like lost tourists in a foreign land asking people where which block or gate is. It is a great relief to enter our bloc i.e. F-2. Ever building at Amity is like an enigma. At the basement of our building itself, we have a canteen, a restaurant ( Wallstreet, and a gaming zone called Arcadia. Since there is not much outside the campus,once we are done with classes we go and chill in the Arcadia. Arcadia is not exclusively for our building, but it’s famous throughout Amity. You can play Pool/Snooker/Billiards (still don’t know the difference), air hockey, foosball, videogames, and even do bowling. In fact the even have a carom and ludo table. If you aren’t interested in any of that you have an eatery inside the Arcadia itself. We are still in the process of exploring all the cafeterias below each building. Its just disappointing to the non-vegetarians. There is no non-veg served on campus. However, right outside gate 2A you have various stalls where you get non- veg and all sorts of rolls, momos, and maggi .Just one of these buildings in the Amity Campus is the Central Library. It is a huge two storey building which even has escalators installed. It has books covering most of the subjects. Except well Law. For Law books we have our own small library in our own building.

The first few days of college were awkward. Everyone was just getting familiar with one another and being overly sweet knowing that they’d be spending the next 5 years of their lives with each other. It is hard to imagine that I would be 23 by the time I pass out. As far as the crowd is concerned it is not that diverse since IP reserves 85% of their seats for Delhites. Some of the people even ended up finding people with mutual friends. Some of them were shocked when their myth of what college would be like was broken. Many had the image of college coming straight out of a karanjohar movie where people would bunk and party. I thankfully did not have such perceptions since I knew it was Law School. Ive had friends who’ve completed law school in 8 years. I had been guided by them to not take the attendance that lightly. It is compulsory to have a minimum of 75% attendance in every subject. Attendance is the only thing that is keeping people in class. Hardly anyone has bunked as yet. In fact, attendance is the best threat/incentive a teacher can give. It is taken in every class. In a day we usually have maximum 4-5 classes. Apart from that on a few days we have our PSDA (Personal Skill Development Activity ) class on which we are marked. Every morning, there is a huge crowd around the bulletin board on which a new daily schedule of classes is put up. While us first years have a hard time deciphering the initials of the teachers’ names. In class, most of the friend groups formed have started to solidify. Since I enjoy most of my subjects, classes actually seem interesting. We often deviate from the main crux of what we are studying and end up having these intense debates in class which I thoroughly enjoy.

This year onwards, they have started a new activity known as the Mentor-Mentee Program where you have numerous activities to choose from, and at the end of it achieve the established goal. You also have various societies (debate, dance, and music, moot court) to choose from. We start mooting from first year itself. The seniors are pretty enthusiastic about mooting and most of them are extremely helpful. From what I’ve heard, the first moot of ours (which would be held in October) would not be that serious. It would be more of ragging where seniors would grill you and make you do weird antics. It has been an old tradition which our seniors choose to carry forward and hopefully we will too.

Amity Law School Delhi is our second home. More than half of our day is spent in here. From what seemed like ‘school for 5 more years’, it’s getting better as the days pass. I guess I’d have more to say once I’m done with this 5 year long journey.

About The Author:

Ria Khanna, is a first year BA LLB student at Amity Law School, Delhi. She is an Air Force kid and has lived practically out of bags half her life. She loves a good conversation and tea.

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