One of the worst economic effect to what the Islamist called the “Islamic revival” that plagued the Middle East in general and Egypt in particular is the mushrooming of “Islamic investment companies” in the 1980s. Companies like “Al Rayan”, “Al Saad”, and “Al Hoda”, in addition to hundreds of other smaller Islamic investment companies controlled a big chunk of the savings of the poor and middle class investors preaching “Halal” profit against the banks interest rates they called it “Reba”, which is forbidden in the Quran.
We all remember what happened when this pyramid scheme collapsed and millions of small investors lost their life savings; some committed suicide and others had heart attacks. The only winners of this disaster were the founders of these companies and statesmen in the government, the army and the security forces in what was known as “Baraka List”. One person stands out in this saga was the infamous sheikh “Al Sharawy” who used his power in his daily sermons at mosques and TV, to convince Muslims to invest in these companies while he was paid $40,000 per month from “Faisal Islamic Bank” just to bless their product and in an clear conflict of interest situation.
Back then, I got into futile discussion with some friends, family members and relatives questioning the 25-30% profit that these companies were distributing explaining that the only ways to get these kind of profit is through speculations on gold and US dollar or from the drug trade. Most of them didn’t believe me and lost their life savings and had to go back and work in Saudi Arabia or the Gulf states to recoup their losses which affected their health, wellbeing and took a toll on their family ties with their kids and spouses.
I can accept this manipulation to be effective in Egypt where illiteracy ran around 40% and even the educated ones are financially illiterate, but when that happen here in Canada, I can’t fathom it because investors have options from reputable banks. One of the sad stories is “U M Financial” and its owner Omar Kalair who sold “Halal” Islamic mortgage to Muslims in Ontario. He declared bankruptcy in 2014 and squandered $4.3 million so home owners lost their homes and have to evacuate them to pay for the debtors.
In the 1980s, Islamic mortgage companies charged 18% profit in a rent to own scheme, but unlike Canadian banks this profit didn’t go down as interest rates reached 6% forcing lots of aspired home owners to default and evacuate their homes without any equity.
The idea of Islamic banks and companies started with the founder of the Muslim Brotherhood “Hassan Al Bana”. He established “Islamic Transactions company” in 1928, with no success because there was a viable alternative in “Misr Bank”. Talat Harb established this bank with Egyptians investment and Egyptian management to counter foreign banks that controlled most of the financial transactions in Egypt. The bank funded and established industrial productive companies such as: Misr Textile, Misr Tourism, Egypt air, Studio Misr, Misr mining, Misr Petroleum and many others, thus employing tens of thousands of Egyptians from the poor and middle class. These productive and long term investment is in stark contrast to the Islamic projects which are based on short term investment and speculations in real estate and precious metals (in Europe & North America) that can go bust in a blink of an eye, with negative effects on the exaggerated real estate prices and higher inflation rates that eats up people’s incomes. Islamic banking flourish mainly in politically and economically unstable and unproductive countries that rely mainly on one source of revenue (oil or tourism) with no industrial base to compete in the global economy so the only viable investment is real estate or gold.
The effect of religion is not reserved to Egyptian Muslims, A funny story happened in the 1990s when an Egyptian Coptic migrated to Canada and after 2 months went to get government assistant. The administrator asked him how he spent the money in his immigration visa in two months, he told her he bought a spot in a Coptic grave yard run by people from the church? She didn’t believe him until he showed her the papers, then she yelled at him and said: “you come to Canada to live not to die” and refused to approve his social assistance request.
Dear new comer; please do your homework and don’t be fooled by religious slogans like “Islamic Mortgage” and check what Canadian banks are offering and choose what is best for you.