05 Feb 09 Bank of Japan Gives Away Money Interest Free

An interesting opinion piece written back in December by William Pesek.  If all central banks start offering zero percent on money loaned, it will raise many new possibilities that didn’t exist before for Islamic Finance.  One of the interesting things pointed out in the article is that Islamic assets will be worth $1 Trillion by 2010.

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Fed, BOJ Signal We Are All Islamic Bankers Now: William Pesek

Commentary by William Pesek

Dec. 8 (Bloomberg) — Attending Islamic finance conferences these days, it’s hard not to notice how this investment class is catching on.

The world’s roughly 1.5 billion Muslims need a way to bank and invest according to Islamic Sharia law, which bars receiving or paying interest on loans or deposits. A massive market infrastructure is being built to facilitate clients that include wildly rich Persian Gulf oil tycoons.

Yet isn’t this industry being pirated by the Bank of Japan, Federal Reserve and other central banks destined to offer interest-free loans? As U.S. President

Richard Nixon, echoing Milton Friedman, famously quipped in 1971: “We are all Keynesians now.” By 2009, we may all be Islamic bankers, too.

It’s an odd yet apt comparison. Islamic banking is more about the means by which a certain group of people obtains money. Zero interest rates are about getting as much money, in any way possible, to everyone.

There’s still something to be said about the spreading appeal of scrapping interest rates. It’s no longer a unique aspect of certain transactions or a banking novelty. It’s becoming the norm, and it’s quite disorienting. (more…)

Tags: bank of japan, ben bernanke, federal reserve, Islamic Finance