Sunday, October 08, 2006

Islamic finance betrayed

On Background Briefing on Sunday October 8 I updated developments with regard to the mysterious Commercial IBT Bank, the Australian company which announced on April Fools Day 2002 that it had eight billion dollars and had been awarded a banking licence in Labuan Malaysia. ASIC wound it up in 2004 a few months after I broadcast a story about it on Dateline on SBS TV.

In July this year President Director of that bank Adrian Ong was arrested at Melbourne Airport and charged with fraud. He is out on bail.

My investigation for Bankground Briefing led me to the Muslim Community Co-operative of Australia, whose name came up a number of times during inquiries into Commercial IBT.

And this is where it moves away from a detective story and gets really interesting (from an economic, theoretical point of view).

Much of what the MCCA and other financiers pass off as Islamic finance is arguably no such thing. If you follow the financial flows and the legal obligations the 'Islamic' contracts appear to be almost exactly the same as western financial contracts - Coca Cola served up as Mecca Cola, in the words of one of the experts who appears in the program.

You can read about it in the transcript, half way down - or better still, download the entire 50 minute radio program and listen.

Until I began investigating Islamic finance I always thought it was Islamic - it didn't just use another name for interest, it avoided the need for interest. I was wrong, and I am surprised the story isn't being told more widely.

This was my last story for the ABC. But I'll keep an eye on so-called Islamic finance in my new role with the Canberra Times.