Come for the Liberty, Stay for the Sharia

Speaking of Sharia Central, to the litany of cab rides, pork sales, feet washing, and terror free airline travel, let's add one more item to the accommodations needed by one of our immigrant communities.

The City of Minneapolis and the African Development Center (ADC) have partnered to offer a new alternative financing program targeted at small businesses in the city. The program addresses Islam's prohibition on paying interest on loans.

At a press conference in Minneapolis to announce the program, Mayor R.T. Rybak impressed by the business zeal of the Somali and larger African community in the city had no doubt that this new financing program would benefit the city, "The city (Minneapolis) has built equity thanks to African small business owners. This city is the Statue of Liberty for Somalis even in Mogadishu."

Bring us your tired, your poor, your huddled masses .... isn't that already the slogan for the light rail line?

Beyond depressing is the thought that RT Rybak is out there promoting Minneapolis as a beacon of liberty while running a government whose designs are the exact opposite. Ever increasing taxes and regulatory fees, smoking bans, traffic tickets by camera, etc. etc. If this is liberty, who needs government control?

Then again, Minneapolis is no Mogadishu. That probably is enough to get some good word of mouth going over there on the Horn of Africa about making a move.

Won't they be surprised upon their arrival to find out that Minneapolis has already brought a little of Mogadishu over for them. About those Islamic friendly loans:

Islam prohibits the collection and payment of interest. It is with this in mind that two years ago that Samatar through ADC began working with the City of Minneapolis in establishing a financing program that would allow the growing population of Muslim entrepreneurs whose religion restricts them from receiving traditional interest-based financing.

How the Loan Works

* A private lender provides half the financing at their rate of return
* The City provides the rest of the financing, up to $50,000, at a 2% rate of return
* The term of the loan (up to 10yrs) is set by the lender

I'm not sure how "rate of return" differs from paying interest. Sound like accounting gimmicks and semantics. Is that all you need to get around Sharia Law provisions? Maybe. We all know how tolerant Muslims can be.

A few more details on the Minneapolis program provided here:

Under the plan, investment repayment is based on a profit model rather than interest. "This type of financing opens doors for the city's growing number of Muslim business owners whose religious beliefs restrict them from receiving traditional interest-based financing," said Hussein Samater, Executive Director of African Development Center.

Wikipedia provides a list of Islamic banking techniques. The outline above best matches this concept:

Mudarabah (Profit Loss Sharing) - Mudarabah is an arrangement or agreement between a capital provider and an entrepreneur, whereby the entrepreneur can mobilize funds for its business activity. The entrepreneur provides expertise and management and is referred to as the Mudarib. Any profits made will be shared between the capital provider and the entrepreneur according to an agreed ratio, where both parties share in profits and only capital provider bears all the losses if occurred.

That sounds about right for a public investment in Minneapolis. Although I must admit, this one seems even more like RT Rybak's management style:

Qard Hassan - This is a loan extended on a goodwill basis, and the debtor is only required to repay the amount borrowed. However, the debtor may, at his or her discretion, pay an extra amount beyond the principal amount of the loan (without promising it) as a token of appreciation to the creditor.

Now that's a variable interest rate loan I can get behind. I'll have to request this option from my Ukrainian mortgage broker next time I'm in the market. After laughing in my face, I suspect he'll tell me this is a reason he's not planning on opening a branch office in Mogadishu anytime soon.

What I find interesting about this whole program is that the City of Minneapolis has such a vast reservoir of money to give away, they're looking for innovative, new ways to distribute it. There are no cultural barriers that can't be overcome when it comes to spending tax dollars.

The larger logic of this is curious as well. Investing public money in businesses that are unable or unwilling to participate in the broader economic system of the country. What does that say for their ability to be successful after the start up funds are gone? Is that taken into account before we start dumping public money into them?

Furthermore, I think its fair to say that countries which have adopted Sharia law typically have stagnant, moribund economies. Is that mere coincidence, or is there some relationship between the two conditions? If there is a relationship, is that the kind of system we want to be importing into Minneapolis?

I plead some level of ignorance on this and send a request to that 800 lb. silver back gorilla of economic knowledge in St. Cloud for answers. Access to credit and liquidity of capital are generally good things for an economy, right? Assurances of a market rate of return encourages investment of capital, right? This is what we want, right?

I end with another expert in the field, Victor Davis Hanson. He detailed his "dream" about how the West could be responding to the challenges that face it. This excerpt seems relevant right here in Minnesota:

Europeans would advise their own Muslim immigrants, from London to Berlin, that the West, founded on principles of the Hellenic and European Enlightenments, and enriched by the Sermon on the Mount, had nothing to apologize for, now or in the future. Newcomers would either accept this revered culture of tolerance, assimilation, and equality of religions and the sexes -- or return home to live under its antithesis of seventh-century Sharia law.