Is investment banking Halal or Haram

The conference is almost over, host Dirk Zetzsche wants to invite you to dinner. "Come with us to the premises of the University of Liechtenstein. Let's eat something, talk, and drink a glass of wine together." A murmur goes through the hall, dozens of astonished faces look at Zetzsche. He hastily corrects himself: "A glass of juice, of course I meant a glass of juice."

The rules of the Sharia, which is all about this Tuesday, have not yet fully reached those responsible in Liechtenstein. But that should change. Islamic finance, i.e. investments according to the rules of the Koran, is intended to give the small country, which was previously known primarily as a tax haven, a new boost. Absolute anonymity and protection of secrecy, the qualities with which Liechtenstein previously won customers, no longer exist. New international agreements have changed the rules of the game on the financial market.

The rules according to which devout Muslims are allowed to invest their money are complicated and involve some investment costs, explains Dirk Zetzsche, who teaches banking and financial market law at the University of Liechtenstein, but could attract wealthy customers. Liechtenstein has high hopes for Islamic finance. The "new business model for financial centers", as the conference is officially called, is supported by the Princely House and the National Financial Market Authority.

Exclusion criteria pork, alcohol and gambling

A dozen experts from Great Britain, Singapore, India, Bahrain and Germany will explain to interested bankers which rules they have to comply with in order to attract devout Muslims. First of all, there are the obvious exclusion criteria: pork, alcohol, gambling, prostitution, pornography - and everything that has to do with it. This includes hotel chains and aviation companies, because alcohol is served there. The Sharia boards, which judge whether a facility is halal (permitted) or haram (prohibited), do not allow themselves to be discussed on this point.

Also forbidden: Riba. Riba denotes interest according to popular interpretation, which means that Muslims are neither allowed to take out a loan nor own a savings account. There is not much leeway: Riba is one of the main sins of the Koran alongside murder, flight in battle and the accusation of chaste women. "Well, there's no interest at the moment anyway," grumbles a banker in Swiss German.

If one interprets the concept further, all ethically unjustified capital gains are meant: Exploitation and injustice should be prevented. For Dirk Zetzsche, this principle is therefore comparable to other financial rules that are based on ethical and moral considerations and are used, for example, by ethical banks. So careful, decent banking.

During the financial crisis, Islamic-led investments did not suffer so much, he emphasizes - and: even the Catholic Church has declared that it considers the principles according to which Islamic banking takes place to be welcome.

Islamic finance is not terrorism financing

This argument is important for the American Andrew White, he says during one of the breaks between the lectures. "When I come home to North Carolina and tell them that I teach Islamic Finance in Singapore, people are often shocked," he says, taking a sip of sweet grape juice. "People ask me: Isn't that terrorism financing? Are you a Muslim now? Do I have to be afraid of you?" The man with the dark beard next to him looks confused for a moment. White laughs. "I then tell them: No, everything is fine. I am still a Christian." When his people in North Carolina heard this, they were often very interested in his work. The basics of Islamic finance, fairness and brotherhood, also made sense to the people in his home state.

Nevertheless, it is not easy for western bankers to meet the demands of their faithful customers. In contrast to conventional ethical guidelines, which one can consider and control internally in the company, with Sharia-compliant banking one is dependent on an external authority. Depending on how the Koran is interpreted, the Sharia Board can come to different conclusions.

One of the classic instruments of Islamic finance is called a sukuk - it works through the acquisition of property rights. If the acquired goods or claims increase in value, it is legitimate to sell them on for a profit. At least in theory. In practice, sukuk are often cleverly packaged financial products with high return expectations that also fail when checked by Sharia boards. There have even been cases of fraud in which devout Muslims were deliberately deprived of their wealth. And: Many other customers did not meet their profit expectations.

In Germany, where there have been individual Islam-compliant investment opportunities for a number of years, these have been compared with the bestseller "1000 very legal tax tricks". One should not actually make a profit with these financial constructs - but if there is no corresponding sura in the Koran and the Sharia board gives its okay - it works. It can take a while for a portfolio to be set up and accepted.

Some major Swiss banks have scaled back their business

Some major Swiss banks have already scaled back business with Islamic investments. Liechtenstein, on the other hand, sees its advantage here: As a small, safe country with a conservative financial policy, it specializes in tailor-made forms of investment - and is close to Muslim customers on other issues too. "What Islamic finance is about, no greed, no usury - that's basically what we teach our children," says Zetzsche.

The fact that Liechtenstein made headlines in 2009 because the former Post boss Klaus Zumwinkel was able to hide hundreds of thousands of euros from taxes is now just as unimportant as the question of human rights in Bahrain or Dubai, where the experts who have traveled to do their business. A gathering of decent financiers, including a prayer room and pumpkin ravioli. There is a weekly market on the square in front of the hall, there is cheese from the region, and elementary school students play a flute song. In the background the mountains glow in the midday sun. The perfect place to ethically invest your money.

Sharia-compliant investments are, as everyone who stands on stage on this day emphasizes, an enormous growth business. Their share of the world market is still small, but that will change. A 20 percent increase per year is common, it is said, and often it is even significantly more.

"I see no reason why we shouldn't benefit from this reawakening religiosity," says the head of the Liechtenstein Financial Market Authority. Others present figures that say that the majority of Muslims who have conventionally invested money would change if it was not too expensive. And in countries like Nigeria, many people still don't have an account. "There are also customers there who have a lot of money," emphasized one speaker. The argument that the world could become a better through Islamic banking no longer plays a role.