An alternative economic model for the XXI century

While socialist statism has miserably crumbled and wild capitalist free trade is showing all its limits, a third project is appearing on the horizon: Islamic Finance .

Although it is still unknown to the same specialists, it could become the winning model in the XXI century.

In1982 Islamic financial institutions already owned a capital that at present has enormously increased reaching more than 300 billions $, due to the profit coming from oil, with a yearly growth rate, higher than 15%: a huge liquidity which can hold the balance in global economy.

It is based on not very competitive rules, respectful of the Koranic orthodoxy and it is present in more than forty nations with hundreds of banks, which can rely on a great amount of capitals coming from the black gold market.

The Koran considers usury (riba) as one of the greatest sins and forbids (haran) any interest rate, which is very different from the Western bank concept. Nevertheless capitals have a cost, because even if Islamic religion forbids an "a priori" definition of their remuneration, it establishes, however, that capitalists can have a percentage of the money got from the investment, but they can't know it in advance.

As the moneylender must share the investment risks, the bank has to take part in the productive and commercial activities and so it is very attentive both to the correct capital utilisation and to the economic results.

This behaviour surprises Western bankers, used to speculate on capitals, not considering at all the people involved and their aims. The Islamic finance principles are simple and can be summed up in few rules:

• Any predetermined interest rate payment on the sum of money lent, is forbidden;
• The lender must share the profit and loss coming from the business in which the money was invested;
• Earning money from money is against the Koran principles;
• Any financial operation in which uncertainty, risk or speculation are present, is forbidden;
• Investments must favour exclusively activities and products which are not against Islamic religious principles.

In Islamic civilization solidarity and social welfare prevail on merely lucrative activities and personal profit: an abyssal difference in comparison with Western finance that just pursues individual wealth, selfishness and a frantic profit search.

According to Mohammed, only honest human work, the biblical "brow sweat", can ethically and legally justify individual enrichment. In this way, usury refuse has favoured investment forms in which profits coming from business are equally distributed among partners who share risks too.

No doubt Islamic finance presents some weak points among which the exclusion from the secondary market; in fact the prohibition of making business with banks that use interest rate, doesn't allow economic operations with the Western market, as well with the credit cards one.

Petrol dollar shareholders choose investments only with companies in line with their religious rules, respecting a wide share list approved by a wise men council. As a consequence, shares related with pork meat or alcoholics producers and with casinos network will be not purchased.

In spite of these limitations, some advantages are undeniable, such as inflation reduction, due to a productive use of money and a careful bank control on investments.

Such economic model, not practised in the Western World, got a surprising appraisal with the 2006 Nobel Prize for Peace, awarded to the Bengali banker Muhammad Yunus. This event demonstrates that a close link between economy and solidarity can create peace which will be a long lasting one, only when poverty will be eliminated all over the world and Yunus's auspice will be achieved:

- One day our grand children will have to visit museums to understand what poverty was - he said.

Born in Bengal, one of the most derelict regions in Bangladesh, Yunus got important academic titles, but he gave up a brilliant carrier as a university professor in the USA

and went back to his country to help one of the poorest populations in the world.

Coming fully in touch with the reality of his country, he discovered how the economic theories ,which he taught, were far from the harsh reality of the rural world.

He understood that the extreme poverty of the population didn't derive so much from ignorance or laziness as from lack of a financial support.

He put economic science into service of the poorest people and created a new financial formula: microcredit.

He began walking through villages with his collaborators, lending people few indispensable dollars to help little entrepreneurial activities.

Slowly a virtuous circle started with impressive effects on the emancipation of many women who were encouraged to unite and form widespread cooperatives.

His first loan consisted just of 27$, given to a group of women who produced the bamboo furniture in a village.

They worked for persons who exploited them reducing them to poverty.

No traditional bank gave money to people that didn't offer any guarantee and nobody was interested in low profit small projects with a very high potential risk.

In 1976 Yunus founded the Graameen Bank which granted the poor some loans based on trust, not on solvency.

In order to guarantee repayment, the bank gave money to many people and each of them was obliged to pay back "joint and several".

In this way, besides a widespread microcredit, modern irrigation and fishing systems were realized and above all female little entrepreneurs were financed, thus favouring women's emancipation in an Islamic Nation where the gentle sex definitely has an inferior position and where a widow or a divorced woman are really the least important people on the earth.

The Graameen Bank has produced a beneficial revolutionary effect inside the same World Bank which has started to use similar projects, transforming the microcredit idea into a powerful instrument of economic and financial development in more than 100 nations, from Uganda to the US, where it lends money to many people that are reduced to poverty by a cruel capitalist system.

In 30 years the Graameen Bank has offered loans to over 5 million people for a total of 5 billions $, with a repayment rate higher than the Western Banks'.

Religious fundamentalism, which is against the improvement of women's status, has tried to boycott the initiative in the first years, but then it has renounced and, considering the great benefits for the whole population in Bangladesh, where nothing works well, it has helped the repayment mechanisms of Yunus's Bank, so that they can be as precise as Swiss watches.

The powerful peace message coming from this extraordinary figure, can't leave us cold: finance has always been evaluated with a profit parameter, while it is necessary to set aside part of resources for initiatives of fundamental social utility.

Today ethical finance is an objective to reach, both in the East and West, creating a system which, though respectful of the essential credit principles (like transparency and economic vitality), will not oppose peace, civil and human rights and hopes of mankind with destructive activities, such as weapons traffic, productions highly damaging to health and Nature, activities based on minors' exploitation and repression of freedom.

translated by Giovanna D'Arbitrio