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Islam is concerned with the well-being of society, sometimes at the immediate expense of the individual A single interest-based loan may *seem* harmless, but an entire economy based on interest can have devastating consequences
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Most problems are not root causes; but rather symptoms of root problems Global warming is a symptom of a root problem: the problem of interest and the unnatural demands it places on people and countries, and, ultimately, the Earth
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Interest is not ONLY cause. But a very major cause of global warming.
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Source: NASA
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Irony and Reality: When its everyones problem, no one does anything about it
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"All that we had borrowed up to 1985 or 1986 was around $5 billion and we have paid about $16 billion yet we are still being told that we owe about $28 billion. That $28 billion came about because of the injustice in the foreign creditors' interest rates. If you ask me what is the worst thing in the world, I will say it is compound interest."
Obasanjo, Ex-President, Nigeria
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Year
1985 1986 1987 1988 1997 1998 1999 2000
Debt
5,000,000,000 7,000,000,000 9,800,000,000 13,720,000,000 283,469,561,876 396,857,386,627 555,600,341,278 777,840,477,789
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Year
1985 1986 1987 1988 1997 1998 1999 2000
Debt
5,000,000,000 6,500,000,000 8,450,000,000 10,985,000,000 116,490,425,612 151,437,553,296 196,868,819,285 255,929,465,070
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Year
1985 1986 1987 1988 1997 1998 1999 2000
Debt
5,000,000,000 5,780,000,000 6,681,680,000 7,724,022,080 28,475,018,398 32,917,121,268 38,052,192,186 43,988,334,167
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Only 15%
Interest rate of 15% Exorbitant Unfair Illegal Banks charge upwards of 30% interest rates
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Istisna
Musharakah, Mudarabah
Murabaha
Sukuk
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Poor country. $100 million over 20 years. Sustainable reforestation project. Murabaha with a 10% mark up compared with a soft loan at 5%. With the Murabaha the $100 million becomes $110 million. Simple. With the interest based loan lets see. We assume the country is not able to repay until year 20.
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Debt
100m 105m 110m 115m 121m 127m 134m 140m 147m 155m 162m
Year
11 12 13 14 15 16 17 18 19 20
Debt
171m 179m 188m 197m 207m 218m 229m 240m 252m 265m
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Tropical forest countries own roughly 2/3rd of the developing world's debt Sub-Sahara Africas debt: 1980: US$84 bn 2001: US$275 bn Despite frantic development and a constant stream of refinancing
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Brazil
Source of 40% of the worlds oxygen At current deforestation rates, there will be hardly any rainforest to speak of within this century
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Economic production to meet Brazils massive debt burden: $216 billion Interest payments on this debt force further deforestation to meet payments
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Ghana: One of Africas most indebted countries 60% of forests have vanished since they began servicing their debt to the World Bank and the IMF
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Indonesia:
World Bank lent $500m for a massive logging project, tearing down more of the natural forest Debt-for-nature swap: US will forgive Indonesia for some of its debt - $30m $30m hardly covers a fraction of the interest payment on the $500m loan
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Interest-based projects financed by the World Bank will release over their lifetime 37.8 billion tons of carbon dioxide into the earths atmosphere."
Friends of the Earth
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Problem prevalent in many other countries that accumulate interest-based loans and yet play a critical role in the worlds environments The pace at which industry must be driven to keep up with interest based loans is unsustainable
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"The ethical principles on which Islamic finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service."
The Vatican, March 2009
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Recommended Reading
Debt and the Environment: Converging Crises (Morris Miller, 1991) The Vanishing Face of Gaia (James Lovelock, 2010) The Economics of Global Warming (William Cline, 1992) The Problem with Interest (Tarek El Diwany, 2003) An Inconvenient Truth (Al Gore, 2006)
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The worlds 3 richest people have more wealth than the combined GDP of the 48 poorest nations
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Questions
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Can you explain the difference between the two ways in which interest creates unsustainability: Debt payments vs. fractional reserve banking?
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Can the Islamic financial institutions be encouraged to adopt green technology in their transactions?
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Currently Islamic banks do not screen projects for ecofriendliness. Are there any stipulations or standards?
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Would it be equivalent to "stop giving my money to interest based banks" to give my money to the Islamic part of a regular bank e.g. HSBC's Amanah?
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What about student loans where the interest is held off, supposing it is paid off before interest is incurred?
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You say Islamic finance provides a better solution for environmental preservation but apparently in business and Shariah decisions this aspect is always neglected compared to conventional ethical finance and investment. Your comments please.
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Credits
Cover Image: Earth Egg by AZRainman (http://www.flickr.com/photos/azrainman/2047910540/), License: http://creativecommons.org/licenses/by/2.0/ Chart 1: Courtesy - UK Meteorological Office Chart 2: Courtesy - NASA Cartoon: Source - http://openparachute.files.wordpress.com/2010/03/ipcccartoon.jpg Logo IPCC, AAAS, AMS, and Friends of the Earth respectively
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