Islamic Banking Offers a Moral Choice for Muslim Borrowers

Charging interest is the way bankers around the world make their money--except, that is, in the booming business of Islamic banking.

The Koran bans interest. And it bans lending money if the loan is not for a productive purpose.

But Islamic bankers have found a way of lending money without charging interest. Borrowers pay a fee instead.

Since the first Islamic bank opened in the Nile delta 25 years ago, the system has spread to more than 70 banks controlling between $25 billion and $30 billion.

There are Islamic banks throughout the Middle East and Asia, in Europe and even in New Zealand. Iran and Pakistan say their whole economies have switched to Islamic principles.

The key is that charging a fee for providing a productive loan addresses Islam’s concern about the moral consequences of usury.

“Money is not an end in itself, it is a means to an end,” explains Saudi Prince Mohammed al-Faisal, chairman of Dar al-Maal al-Islami, the biggest Islamic banking group.

Dar al-Maal al-Islami was founded in 1981 in Geneva and now has a portfolio of $2 billion invested in projects that range from 25 Islamic banks to a plant that makes watches that chime at Muslim prayer times and show the direction of Mecca.

Western skeptics say Islamic banks charge interest by another name.

Islamic bankers say the cost may be similar but argue that their system, with its emphasis on how money is used instead of on the money itself, is different and offers an alternative system for the world’s 800 million Muslims.

“It must be remembered that the Western system has had hundreds of years to develop. . . . Our goal and philosophy are long term,” Faisal said.