Form or Substance

Friday May 7, 2004

On Friday evening, I had a seminar at the Islamic Society of Boston which is located in Cambridge, MA half way between Harvard and MIT. It was between the evening (maghreb) and night (isha) prayer and there were approximately 40 people in attendance. After the seminar, I had a conversation with some some of the active members of the community and they wanted to speak further about their own project in the heart of Boston. The City of Boston has given permission for ISB to build a $22 million facility with a mosque, school, and a cultural center. The land was purchased for $180k and the current market price is about $1.5 million. In return, the ISB promised to clean up the neighborhood, as well as teach Islamic Studies classes at the community colleges in the area (pretty good deal, in my opinion). Anyway, the project began about 1999 and they have about $4.5 million raised. The unfortunate part is that it has been sitting in a non-interest bearing checking account for the past few years. I gave them ideas of what they could do with the money, and out efforts at creating the Amana Savings account made sense in light of their situation.

Saturday May 8, 2004

Harvard was holding an Islamic Finance forum and there were individuals and companies from all over the US and the world who are dealing with Islamic Finance. I met quite a few people but it was very apparent that the Islamic Finance industry in the US is far behind that of the Muslim Countries. This is not surprising considering that there are considerably more people and money there. However, what I found of note was the majority of the Islamic Banks across the world are dealing with institutions and wealthy individuals, whereas in the US, the focus has been on the entire Muslim community. The Muslim World industry went where the money is, and in the US, we have primarily targeted the "community". I think this is a good complement since they have the resources for product innovation and we can apply them to US laws and regulations.

During this conference, I also met with some people from a new credit union starting in Canada known as Salam Investments. I think they have chosen a most excellent name!!!! Anyway, they are working as a subsidiary of a larger credit union (can't recall the name) but will begin to offer products for the Muslim community in Canada, which is about 1 million strong concentrated in 5 cities. The CEO was familiar with the Amana funds and also of the SAMI fund in Canada. He is very interested in offering products through Amana to the Muslim community there. I suggested some time of a sub-advisory role where they apply for the licenses. Further discussion is needed.

There was also an interesting discussion that took place regarding Islamic Finance and what academians and institutions should be focusing on when it comes to new products. On one side is the camp in favor of form, which argues that you take the banking system as is, and create products that are Sharia compliant to achieve the same results, but with different form. One lawyer for King & Spalding in NY gave an elaborate example of this which in the end looked like the investor was just changing the names of interest to profit. Interestingly enough, this is what many, many average people complain about when looking at various financing options. On the other side are the people who are looking for substance. That if Islam is supposed to wipe out injustice in it economic system, and since Allah mentions that Riba (Interest) is a form of injustice, then we should truly come out with products that wipe out injustice and not just change the meanings of words. In my opinion, you need both. As this industry is new, we need to change form, and as it develops, we need to change substance.

Sunday May 9, 2004

I took a train out about 45 miles from Boston to a town called Lowell, MA. I gave a seminar after the afternoon (duhr) prayer and there were approximately 25 people in attendance. Not surprisingly, many had never heard of the Amana funds and were very glad to hear the presentation. One question that was asked was again regarding endowments for schools and mosques. The person asked what the minimum was to open an account for an investment account for a mosque. After the presentation, it got me thinking that even if the mosques have no large sum of money for investments, we should encourage them to open an account with minimum, and then contribute monthly. This way, we will get them to invest early on, their money will grow, and when it does come time for them to invest a larger some, they will already have a relationship with us.

Many things to do, not enough time to do it.............