- Trump’s Actions Against Muslims has Triggered the Law of Unintended Consequences
For 40 years, I have been generally aware of Shariah investing. The events of this past week including the outrageous and unlawful travel ban against Muslims demand that I, and you, become knowledgeable.
In my youth in the 1960s, I attended a religious school, Waterloo Lutheran University, that later became a publicly-funded university that had to change its name to Wilfred Laurier U. My schooling required that I take a course on world religions, including a study of Muslim practises. Although I aced the course, I was young and did not pay much attention.
One of my most personally embarrassing moments ever occurred in the early 1970s as a direct lack of knowledge in this area. Before I sought a career in capital markets, I was involved in healthcare management systems. My clients were medical associations, medical schools, hospitals and medical clinics and I had many doctor friends. The father of one had emigrated to Canada from Egypt where he had been working at the highest levels of government. I knew him to be a sophisticated man who had grown two sons as doctors, then practising in Canada. One day in private conversation, he rebuked me sharply: “I am not Arab. I am Egyptian.” My embarrassment was that, despite my extensive education, I had no clue about these matters and as a result had upset my close friend.
Over the many years that followed, I admit I was not much affected by the problems of the Middle East. In the past two weeks, however, I have learned a lot. We all must.
As Trump ramped up his twitter attacks against Muslims, I took interest in the TV series called Homeland. In fact, I have binge-watched 60 hourly programs (five years in the Homeland series) in about 10 days. Apart from appreciating possibly the best acting and writing in my experience, I have used this fictional film series to learn a bit about the issues impacting Muslims.
Following the immediate response by investors, a few days ago, to crush the airline industry stocks that surely will be impacted by the Trump travel ban, I googled Shariah. These links ought to improve one’s understanding:
https://en.wikipedia.org/wiki/Sharia_investments
As noted in the 2009 report from PricewaterhouseCoopers
Muslims represent nearly a quarter of the world’s population and yet less than 1% of financial assets are Shariah-compliant(2). There seems to be a disconnect here that is likely to be rectified in the coming years. Indeed, the funds industry is growing at 15-20%3 a year already, and this may rise as young Muslim populations and communities start to save for later life and as their investment preferences expand… Large sukuk issues in recent years have awakened investor interest and created the conditions for much increased institutional investment. There is now both subtle and overt pressure for institutions to support the sukuk market and this has led pension funds and sovereign wealth funds to look at Islamic investment more closely. The dramatic increase in the takaful market and the dearth of products to service it should also present opportunities for asset management firms.(2) This calculation is based on total global financial assets of $140trn (‘Mapping Global Capital Markets’, McKinsey & Company, 2009) and $729bn total assets in the Islamic finance industry (‘Islamic Finance 2009’, International Financial Services London, February 2009).
As noted in the wiki description of Shariah:
Davis, Gregory S. (July 8, 2008). “Shariah Compliance Principles”. Investopedia. Retrieved March 14, 2016. Shariah compliant investment vehicles take socially responsible investing (SRI) to a new level, proving that conscious investing does not necessarily depress returns. Hedge funds can turn to specialty shops that specialize in weeding out investments that violate Islamic Law. Non-accredited investors (investors with less than $1 million to invest) can also gain admission by following Shariah indexes or mutual funds. … Islamic law does not permit investors to derive benefits from interest paid on loans, the sale of pork, firearms, and other sin investments related to pornography, gambling, alcohol or tobacco. Institutions that engage in short selling and the use of leverage are also frowned upon since borrowing goes against one of the basic principles of Islamic law. Following these rules cancels out the possibility of investing in investment banking firms like Goldman Sachs (NYSE:GS), insurers like AIG (NYSE:AIG) and other financial service firms that use derivatives as a way to boost their profits.”
As someone who is a socially responsible investor, I will not accept the Trump world view without speaking out and without acting. Most Americans are decent human beings. They too are acting in response to this disgraceful travel ban and the thinking that underlies it. For now, the Fed could throw money at the problem; but what starts with airline stocks could also quickly get out of hand and the US Dollar exchange rates could plunge. America is now in crisis. I hope the US Congress gets the message and acts to prevent a capital markets melt-down.
/Bill
