Date post: | 18-Jul-2015 |
Category: |
Documents |
Upload: | ethica-institute-of-islamic-finance |
View: | 23 times |
Download: | 0 times |
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 1/56
Interest-Based Finance and Global Warming:Making the Connection
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 2/56
Vast topic: Basic Theme Explained
• Interest compounds faster than nature’s ability tocope with this growth
• Growth of the physical world can never keep pace
with the growth of money compounding on interest
www.EthicaInstitute.com
• s we nar s a s ar ng po n or scuss on
• We don’t have all the answers. But we would like tostart by asking the right questions and raising theissues
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 3/56
• Islam is concerned withthe well-being of society,sometimes at theimmediate expense of theindividual
• A single interest-based* *
www.EthicaInstitute.com
harmless, but an entireeconomy based on interestcan have devastatingconsequences
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 4/56
Alcohol is the world’smost dangerous drug(Lancet, British medical journal)
www.EthicaInstitute.com
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 5/56
• Most problems are notroot causes; but rathersymptoms of rootproblems
• Global warming is a
symptom of a rootproblem: the problem of
www.EthicaInstitute.com
interest and theunnatural demands itplaces on people andcountries, and,ultimately, the Earth
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 6/56
Interest is not ONLY cause.
But a very major cause of
global warming.
www.EthicaInstitute.com
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 7/56
Global warmingis caused byhuman inputs to
www.EthicaInstitute.com
human inputs tothe environment
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 8/56
Controversy:
Climate modelingSolution: Focus on
www.EthicaInstitute.com
Solution: Focus onhistorical, publiclyavailable data
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 9/56
www.EthicaInstitute.com
Source: UK Meteorological Office
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 10/56
www.EthicaInstitute.com
Source: NASA
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 11/56
Global warming:
Triggered byexcessiveconcentration of
www.EthicaInstitute.com
concentration ofCO2 in theatmosphere
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 12/56
CO2 is theby-product ofburning fossil
www.EthicaInstitute.com
burning fossilfuels
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 13/56
1980-2007
Arctic ice shrankfrom 10M sq.km.
www.EthicaInstitute.com
from 10M sq.km.to 4M sq.km.
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 14/56
Greater incidence
of drought atsubtropical
www.EthicaInstitute.com
subtropicallatitudes
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 15/56
Ultimate problem:Inability to growfood and access
www.EthicaInstitute.com
food and accessclean water
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 16/56
Irony and Reality:
When it’severyone’s problem,
www.EthicaInstitute.com
everyone’s problem,no one doesanything about it
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 17/56
www.EthicaInstitute.com
The Problem With InterestFrom Why Islamic Finance: 7 day free course on www.ethicainstitute.com
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 18/56
"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.
www.EthicaInstitute.com
If you ask me what is the worst thing in the world,
I will say it is compound interest."
Obasanjo, Ex-President, Nigeria
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 19/56
How Did $5 Billion Become $44 Billion?
Year Debt
1985
1986
1987
1988
5,000,000,000
Example: Nigerian Debt
B orrowed (1985) 5 b il li on
Paid 16 billion
Owe 28 billion
Interest rate 40%
7,000,000,000
9,800,000,000
13,720,000,000
www.EthicaInstitute.com
…
…
…
1997
1998
1999
2000
283,469,561,876
396,857,386,627
555,600,341,278
777,840,477,789
…
…
…
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 20/56
How Did $5 Billion Become $44 Billion?
Year Debt
1985
1986
1987
1988
Example: Nigerian Debt
B orrowed (1985) 5 b il li on
Paid 16 billion
Owe 28 billion
Interest rate 30%
6,500,000,000
8,450,000,000
10,985,000,000
5,000,000,000
www.EthicaInstitute.com
…
…
…
1997
1998
1999
2000
116,490,425,612
151,437,553,296
196,868,819,285
255,929,465,070
…
…
…
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 21/56
How Did $5 Billion Become $44 Billion?
Year Debt
1985
1986
1987
1988
Example: Nigerian Debt
B orrowed (1985) 5 b il li on
Paid 16 billion
Owe 28 billion
Interest rate 15.6%
5,000,000,000
5,780,000,000
6,681,680,000
7,724,022,080
www.EthicaInstitute.com
…
…
…
1997
1998
1999
2000
28,475,018,398
32,917,121,268
38,052,192,186
43,988,334,167
…
…
…
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 22/56
Only 15%
• Interest rate of 15%
– Exorbitant
– Unfair
–
www.EthicaInstitute.com
• Banks charge upwards of 30% interest rates
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 23/56
The Islamic Finance Alternative
• Provide $5 billion of finance for:
– Infrastructure
– Literacy
–
www.EthicaInstitute.com
–
– Sanitation
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 24/56
The Islamic Finance Alternative
www.EthicaInstitute.com
Sukuk MurabahaMusharakah,Mudarabah
Istisna
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 25/56
The Islamic Finance Alternative
• Products similar to equity, trade, and lease-basedinstruments
• Permits legitimate profit
www.EthicaInstitute.com
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 26/56
The Islamic Finance Alternative
• Islamic bank cannot charge more than initial premium
– $5 billion cannot increase
– Debt is fixed
• Islamic finance creates a bottleneck by tying each
www.EthicaInstitute.com
transaction to: asset or service
• Cash is used to buy, sell, lease, or partner in aparticular asset or service
• Cash cannot be used to simply create more cash
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 27/56
www.EthicaInstitute.com
Islamic Finance vs. Conventional Finance:Murabaha vs. Interest
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 28/56
• Poor country.
• $100 million over 20 years.
• Sustainable reforestation project.
• Murabaha with a 10% mark up compared with a soft
loan at 5%.
www.EthicaInstitute.com
• With the Murabaha the $100 million becomes $110million. Simple.
• With the interest based loan let’s see.
• We assume the country is not able to repay until year 20.
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 29/56
Year Debt
0
1
2
3
100m
105m
110m
115m
Year Debt
11
12
13
14
171m
179m
188m
197m
Islamic Finance vs. Conventional Finance:Murabaha vs. Interest
www.EthicaInstitute.com
5
6
7
8
9
10
127m
134m
140m
147m
155m
162m
16
17
18
19
20
218m
229m
240m
252m
265m
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 30/56
• Tropical forest countriesown roughly 2/3rd of thedeveloping world's debt
• Sub-Sahara Africa’s debt:
• 1980: US$84 bn
•
www.EthicaInstitute.com
• Despite franticdevelopment and aconstant stream of refinancing
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 31/56
• Source of 40% of theworld’s oxygen
• At current deforestationrates, there will be
Brazil
www.EthicaInstitute.com
hardly any rainforest tospeak of within thiscentury
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 32/56
• Economic productionto meet Brazil’smassive debt burden:$216 billion
•
Interest payments onthis debt force further
www.EthicaInstitute.com
deforestation to meetpayments
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 33/56
Ghana:
• One of Africa’s mostindebted countries
• 60% of forests have
vanished since they
www.EthicaInstitute.com
egan serv c ng e rdebt to the World Bank and the IMF
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 34/56
Indonesia:
• World Bank lent $500m fora massive logging project,tearing down more of thenatural forest
• Debt-for-nature swap: US
www.EthicaInstitute.com
w org ve n ones a orsome of its debt - $30m
• $30m hardly covers afraction of the interestpayment on the $500m loan
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 35/56
“Interest-based projectsfinanced by the World Bank
will release over their
lifetime 37.8 billion tons of
www.EthicaInstitute.com
Friends of the Earth
earth’s atmosphere."
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 36/56
• Problem prevalent inmany other countries thataccumulate interest-basedloans and yet play acritical role in the world’senvironments
•
www.EthicaInstitute.com
industry must be driven tokeep up with interestbased loans isunsustainable
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 37/56
"The ethical principles onwhich Islamic finance isbased may bring banks
closer to their clients and tothe true spirit which should
www.EthicaInstitute.com
The Vatican, March 2009
mark every financial service."
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 38/56
Are we asindividuals
www.EthicaInstitute.com
environment?
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 39/56
1. Stop giving your money to interest basedbanks.
2. Start giving your money to Islamic banksand take an active interest in ensuring
5 Things We Can Do Now:
www.EthicaInstitute.com
that your Islamic bank’s products complywith AAOIFI.
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 40/56
3. Islamic finance scholars:
• Need to develop a more refined fiqh of the environment.
5 Things We Can Do Now:
www.EthicaInstitute.com
standard alcohol, interest, weaponsprohibition. Is a particular project bad forthe environment? How bad does it needto be in order to be non-compliant?
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 41/56
4. Write a letter to your jurisdiction: Local bank,national bank, government - requestingIslamic finance to come to your bank, city, or
country, whatever the case may be.
5 Things We Can Do Now:
www.EthicaInstitute.com
5. Consume less: eliminating the need forsomething, reducing, reusing, and recycling,particularly when it comes to fossil fuelconsumption, such as driving a car.
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 42/56
• Debt and the Environment: Converging Crises(Morris Miller, 1991)
• The Vanishing Face of Gaia(James Lovelock, 2010)
• The Economics of Global Warming
Recommended Reading
www.EthicaInstitute.com
(William Cline, 1992)
• The Problem with Interest(Tarek El Diwany, 2003)
• An Inconvenient Truth(Al Gore, 2006)
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 43/56
The Islamic Finance Alternative
• Micro perspective: Why interest is wrong
• All major religious traditions including Judaism andChristianity were very strict about prohibition of usury
• The Church reiterated the definition of usury as
www.EthicaInstitute.com
rece v ng any n eres on money
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 44/56
The Islamic Finance Alternative
• Islam has retained its prohibition of interest, contraryto other religions
• Specific legalizing of interest allowed the current
financial system to evolve
www.EthicaInstitute.com
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 45/56
The world’s 3 richestpeople have more
wealth than the
www.EthicaInstitute.com
combined GDP of the48 poorest nations
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 46/56
Questions
www.EthicaInstitute.com
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 47/56
Can you explain thedifference betweenthe two ways in whichinterest createsunsustainability:Debt a ments vs.
www.EthicaInstitute.com
fractional reservebanking?
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 48/56
Can the Islamicfinancial institutionsbe encouraged toadopt greentechnology in theirtransactions?
www.EthicaInstitute.com
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 49/56
Currently Islamicbanks do not screenprojects for eco-friendliness. Are thereany stipulations orstandards?
www.EthicaInstitute.com
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 50/56
Would it be equivalentto "stop giving my money to interest based banks" to givemy money to theIslamic art of a
www.EthicaInstitute.com
regular bank e.g.HSBC's Amanah?
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 51/56
What’s the differencebetween Murabahaand interest?
www.EthicaInstitute.com
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 52/56
What about studentloans where theinterest is held off,supposing it is paidoff before interest isincurred?
www.EthicaInstitute.com
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 53/56
You say Islamic financeprovides a better solutionfor environmentalpreservation butapparently in business andShariah decisions this
aspect is always neglected
www.EthicaInstitute.com
compared to conventionalethical finance andinvestment. Yourcomments please.
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 54/56
I am confused as towhether time value of money is or is notaccepted in Islamicbanking?
www.EthicaInstitute.com
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 55/56
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
• - -
www.EthicaInstitute.com
- . . . -cartoon.jpg
• Logo © IPCC, AAAS, AMS, and Friends of the Earth respectively
5/15/2018 Interest Based Finance and Global Warming (Presentation) - slidepdf.com
http://slidepdf.com/reader/full/interest-based-finance-and-global-warming-presentation 56/56
www.EthicaInstitute.com
Dubai: +9714 305 0782
US/Canada: +1 858 222 1725