Islamic finance, banking, and takaful (Islamic Insurance) has a large potential in the US and Canada despite several setbacks and various obstacles and hurdles, which exist in any secular country or nation where church and state has been separated i.e. Turkey. Dubai, UAE, May 15, 2014 -- Islamic finance, banking, and takaful (Islamic Insurance) has a large potential in the US and Canada despite several setbacks and various obstacles and hurdles, which exist in any secular country or nation where church and state has been separated i.e. Turkey. In terms of the United States, offering Islamic finance and Islamic financial products may contravene the Establishment Clause of the First Amendment of the US Constitution. In fact, after AIG introduced takaful or Islamic Insurance into the United States in 2008, the US federal government was challenged on the grounds that it violated the Establishment Clause by providing AIG bailout money under the Emergency Economic Stabilization Act (“EESA”) legislation. However, the court found that the EESA legislation and AIG bailout was made for a secular purpose. Furthermore, after discussing takaful in the United States with David Loundy, CEO of Devon Bank, I was informed that a 100% truly Shariáh compliant takaful company may not be possible at this time in the USA as many states have limited investment of collected premiums to non-Shariáh compliant investment grade rated bonds. However, if written into the takaful contract that investment will be made into non-Shariáh compliant bonds, takaful can still work in the USA. In fact, if one mentions to Americans that this form of insurance offers a return on investment as well as risk-sharing, it may become wildly popular in the United States.
The US has seen two major sukuk (Islamic bond) issuances including the East Cameron Gas Sukuk, which was the first ever musharakah sukuk in America backed by oil and gas assets maturing in 2006 and the General Electric Sukuk, which is an ijarah sukuk backed by aircraft leases due for maturity in November, 2014. Although the Cameron Gas Sukuk experienced some technical difficulties, the General Electric Sukuk is performing well and there is a large potential for sukuk in the United States as a capital raising instrument for American firms. In fact, Americans are already investing in structures that resemble sukuk structures. In terms of Canada, there have been no sukuk issuances and there are no Islamic banks while the US has three Islamic Banks including University Bank and Devon Bank in Chicago and Lariba in California. Canada has witnessed a few failed Islamic banking attempts including the Canadian Imperial Bank of Commerce (CIBC) and the UM Financial scandal. The only positive ruling for Islamic finance in Canada thus far has been the permission of Islamic mortgages under Canadian law. Aside from constitutional hurdles and the lack of regulations and laws, which permit Islamic banking in North America, many people have a fear of Islam and the words Shariáh and Islamic. However, as a US Citizen, I would like to clarify that Islam means peace and that there is nothing to be afraid about Shariáh as there is nothing to be scared about Jewish or Christian laws. The laws of the Holy Books promote peace, harmony, justice, and the equitable spread of wealth across society. In fact introducing Islamic finance may benefit certain sections of society, which have been excluded or limited in the current financial system.
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