Why a Natural Gas Company Is Shaking the World of Islamic Finance

Tracy Alloway (0:10)

Hello, and welcome to another edition of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:15)

And I'm Joe Weisenthal.

Tracy Alloway (0:17)

So Joe, do you remember we had on one of the authors of that 3,000 page book called A History of Interest Rates?

Joe Weisenthal (0:26)

Ooh, yeah, that was a really early episode and a really good one.

Tracy Alloway (0:30)

Yeah, everyone should go back and listen to that one, by the way. But I'm curious, did you ever actually read the book?

Joe Weisenthal (0:36)

Should we pause here and give people some time to go back and listen and then resume?

Tracy Alloway (0:43)

No, we're gonna keep going. Answer my question, did you actually read the book?

Joe Weisenthal (0:47)

No, no, I want to, but it is huge. I mean, is it a massive, I'll read it one day, but no, I'm not gonna lie, I haven't read it yet.

Tracy Alloway (0:56)

Okay, well, the secret is most of it is charts, but you should still read it because it's really good. And when I read it, I thought one of the most interesting things in there was actually a history of interest rates. I guess that's obvious, but a history of moral attitudes towards interest rates.

Joe Weisenthal (1:14)

That is really interesting because we tend to think about, you know, just interest rates as being these things that are sort of mechanically set by conditions in the economy and so forth. But we know that at the edge of things, things like usury, payday loans, we do have caps that we consider to be excessive on interest rates, and different cultures at different times have had different views on borrowing.

Tracy Alloway (1:40)

Yeah, and different religions too. Although actually, a lot of the most major religions have very, very unfavorable opinions of usury. So if you go back and read the Bible, for instance, I'm pretty sure there are some passages in there that basically tell you you shouldn't be putting any money in a bank.

Joe Weisenthal (1:56)

That's interesting. I should read that. We should find those passages.

Tracy Alloway (1:59)

Okay, so I've just given you a week's worth of reading homework. The reason I bring it up is because one of the religions that's probably most famous for having an unfavorable attitude towards charging interest, to put it mildly, is Islam.

And there's a whole industry that's been created around that notion to basically allow people to invest in certain assets and to put their money in banks without charging interest and breaking a primary concept of Sharia law.

Joe Weisenthal (2:35)

Right, so from what I understand, and to be honest, I don't understand very much, but the Qur'an lays out, I believe, some rules about how avoiding interest, so then there's an attempt to create financial instruments that avoid violating the Qur'an but serve a similar purpose to bonds and borrowing.

Tracy Alloway (2:58)

That's right.

And the reason we bring it up is because something really interesting actually happened in the world of Islamic finance just a couple weeks ago. And we're gonna have someone on who's watched the development of Islamic finance over the past, I mean, almost a decade, really. And he's gonna explain to us how this industry really grew and what the most recent event might mean for the industry.

Joe Weisenthal (3:24)

Let's do it.

Tracy Alloway (3:34)

So our guest today is Frank Kane. He is senior business columnist for Arab News.

He's also a veteran business reporter at The National, and he's been in Dubai for a very, very long time. Dubai is, of course, a center of Islamic finance, and he's gonna break it down for us. So, Frank, thanks so much for joining us.

Frank Kane (3:54)

Pleasure, thank you. Thanks for having me. I've been here 10 years, by the way. So, yeah. Islamic Finance has been here for considerably longer than 10 years, but I think it's fair to say that it has taken off in the last decade or so, and especially since the global financial crisis 2009, which, as we all know, began as an infection in the Western banking system, asset-related infection, and which ended up bringing down, almost bringing down the world financial system. And of course, this also affected this part of the world very seriously. Dubai almost went bust. It was helped out by its brothers down in Abu Dhabi. But many Islamic financial compensators after the global financial crisis pointed to the fact that this was all the fault of conventional capitalism, of conventional finance, and that if there had been an Islamic financial system in place, it would not have happened.