November 25, 2006 at 2:54 pm | Posted in Earth, Globalization, History, Philosophy, Research, Science & Technology | Leave a comment








Dimensionless physical constants

Fundamental physical constants

In physics, dimensionless or fundamental physical constants are, in the strictest sense, universal physical constants that are independent of
systems of units and hence are dimensionless quantities. However, the term may also be used (for example, by NIST)
to refer to any dimensioned universal physical constant,
such as the speed of light (free
)or the gravitational constant. While
both mathematical constants and fundamental physical constants are dimensionless, the latter are determined only by physical measurement and not defined by any combination of pure
mathematical constants. The list of fundamental physical constants decreases when physical theory advances and shows how some previously fundamental constant can be computed in terms of others. The list increases when experiments measure new effects.

Physicists try to make their theories simpler and more elegant by reducing the number
of physical constants appearing in the mathematical expression of their theories. This is
accomplished by defining the units of measurement in such a way that several of the most
common physical constants, such as the speed of light, among others, are normalized to
unity. The resulting system of units, known as natural units,
has a fair following in the literature on advanced physics because it considerably
simplifies many equations.

Some physical constants, however, are dimensionless numbers which cannot be eliminated
in this way. Their values have to be ascertained experimentally. A classic example is the fine structure constant,


where e is the elementary chargeh-bar
is the reduced Planck’s constantc
is the speed of light in a vacuum, and epsilon
is the permittivity of free space.

In simple terms, the fine structure constant determines how strong the electromagnetic
force is. Nobody knows why it has the value it does.

A long-sought goal of theoretical physics is to reduce the number of fundamental
constants that need to be put in by hand, by calculating some from first principles. The
reduction of chemistry to physics was an enormous step in this direction, since properties
of atoms and molecules can now be calculated from the Standard Model, at least in
principle. A successful Grand Unified Theory or Theory of Everything might reduce the number of
fundamental constants further, ideally to zero. However, this goal remains elusive.

According to Michio Kaku (1994: 124-27), the Standard Model of particle physics contains 19 arbitrary dimensionless
constants that describe the masses of the particles and the strengths of the various
interactions. This was before it was discovered that neutrinos
can have nonzero mass, and his list includes a quantity called the theta angle which seems to be zero. After the discovery of
neutrino mass, and leaving out the theta angle, John Baez (2002) noted that the
new Standard Model requires 25 arbitrary fundamental
constants, namely:

If we take gravity into account we need at least one more fundamental constant, namely

This gives a total of 26 fundamental physical constants. There are presumably more
constants waiting to be discovered which describe the properties of dark matter. If dark energy
turns out to be more complicated than a mere cosmological
, even more constants will be needed.

In his book Just Six Numbers, Martin Rees considers the following numbers:

These constants constrain any plausible fundamental physical theory, which must either
be able to produce these values from basic mathematics, or accept these constants as
arbitrary. The question then arises: how many of these constants emerge from pure
mathematics, and how many represent degrees of freedom for
multiple possible valid physical theories, only some of which can be valid in our
Universe? This leads to a number of interesting possibilities, including the possibility
of multiple universes with different values of
these constants, and the relation of these theories to the anthropic principle.

Note that Delta = 3; being simply an integer, most physicists would not consider this a
dimensionless physical constant of the usual sort.

Some study of the fundamental constants has bordered on numerology.
For instance, the physicist Arthur Eddington argued
that for several mathematical reasons, the fine structure constant had to be exactly
1/136. When its value was discovered to be closer to 1/137, he changed his argument to
match that value. Experiments since his day have
shown that his arguments are still wrong; the constant is about 1/137.036.

The mathematician Simon Plouffe has made an extensive
search of computer databases of mathematical formulae, seeking formulae giving the mass
ratios of the fundamental particles.

See also:

CKM matrix

fine structure
Physical cosmologyMaki-Nakagawa-Sakata
Standard ModelWeinberg angleCabibbo angle


John D. Barrow, 2002. The
Constants of Nature; From Alpha to Omega – The Numbers that Encode the Deepest Secrets of
the Universe
. Pantheon Books. ISBN 0-375-42221-8.

John D. Barrow and Frank J. Tipler, 1986. The Anthropic Cosmological Principle. Oxford
Univ. Press.
Michio Kaku, 1994. Hyperspace: A Scientific Odyssey Through Parallel
Universes, Time Warps, and the Tenth Dimension
. Oxford University Press.
Martin Rees, 1999. Just
Six Numbers
: The Deep Forces that Shape the Universe. London: Phoenix. ISBN 0-7538-1022-0

External articles


Physical Constants from NIST

Values of fundamental
CODATA, 2002.

Variable fundamental constants

ints on varying a and the promise of
Phys.Lett. B585: 29-34.

Scientific American Magazine (June 2005 Issue) Inconstant Constants – Do the inner workings of nature change with time?


November 25, 2006 at 1:50 am | Posted in Books, Globalization, History, Islam, Israel, Middle East | Leave a comment







Reclaiming America: Democrats Must Truly Change Course

by Ramzy Baroud

Global Research, November 24, 2006

The Democrats’ ascendancy within the US Congress could signal the
regaining by the public, of its country’s direction

The astounding results of the US Congressional elections of 7 November
were undoubtedly a welcome sign of change, not in the American political apparatus,
inasmuch as it is in the unmistakable reclamation by the public of its role as the driving
force which shapes the nation’s political posture

This having been said, one must not confuse the redefining of the
public relevance to political discourse and processes, with the political machination and
platforms entrusted with translating the people’s will, grievances or aspirations into
action. The early signs are not promising however, and suggest that for any practical
change to be achieved and consolidated, public awareness and engagement must, for their
part, be neither marginalised nor relegated.

Most analyses agree that Iraq was indeed the decisive factor that
helped turn the tide against the Republicans and their president, with their tired mantras
and slogan-based foreign policy. The decisive outcome of the elections was a resounding
message that Americans can no longer operate on the basis of fear alone, and that the
people of the United States are no longer self-absorbed and incapable of shaping their
overall political outlook on the basis of exterior factors. This time, it was not the
economy, but war that wrought an end, even if temporarily, to President George W Bush’s
administration’s expansionist and even imperialist view of the world.

For a few days, one indulged in the sweetness of victory, at the sight
of neo-conservative ideologues collectively disowning their hegemonic project and their
once-hailed hero, now a lame duck president. The January issue of Vanity
magazine is scheduled to highlight the full scale of the neocons’ historic
disintegration. David Rose has reported on his findings, quoting the war architects
themselves: former chairman of the Pentagon’s Defense Policy Board Advisory Committee
Richard Perle, and former White House speechwriter David Frum, among others. Frum, who
coined the “axis of evil” slogan, told Rose that the situation in Iraq
“must ultimately be blamed on failure at the centre, starting with President

Coupled with an earlier assertion by former
Deputy Defense Secretary Paul Wolfowitz — now the head of the World Bank — at the
National Press Club that Iraq “is not my problem”, and former Defense Department
official Douglas Feith’s abandoning of politics altogether for a teaching position at
Georgetown University, one can rest assured that the future of the disastrous
“Project for A New American Century” is, at best, uncertain. Not even the most
hopeful amongst us foresaw such an outcome, nor the chain reaction that it is generating,
starting with the dismissal of Secretary of Defense Donald Rumsfeld and the expected
relegation of Vice-President Dick Cheney’s position as a key player, in shaping the
country’s future foreign policy direction.

The post-election scene is indeed consistent with the larger picture,
where the architects of war in both the US and Britain, and their faithful allies in Spain
and Italy, are also plummeting. The downfall came in the form of awesome crashes for some,
such as the ones that brought down Spain’s Jose Maria Aznar and Italy’s once invincible
Prime Minister Silvio Berlusconi, last April. The outcome of the US elections was no less
remarkable; the latest episode, in fact, is expected to reverberate for years to come.

The defeat of the Republican Party however, should not be understood as
one that substantiates the ways of the Democrats. The latter offered no practicable
solution to the Iraq war. Moreover, their party fought and won the elections with a
majority of its nominees challenging the need, even, for a timetable for withdrawal. It is
also worth noting that Democrats are equally responsible for the Iraq war: after all, a
majority of their members in Congress voted for it, tirelessly justifying it on legal,
moral and national security grounds.

The voters’ dissatisfaction with Bush’s ‘staying the course’ approach,
perhaps inadvertently, invited Democrats back to a leadership position by a comfortable
margin at the House of Representatives. This development takes place now, after years of
indecisiveness and, frankly, of lack of purpose and cohesion. Despite the fact that it was
the antiwar fervour that created the opportunity for the Democrat’s political recovery, it
could also be the reason sending them back into a state of lengthy hibernation.

The 7 November vote was a mandate that imagined a less hostile and more
sensible and prudent America. The vote could be said to envisage a country that neither
negotiates its civil liberties, nor ‘pre-emptively’ engages in brutal wars that damage its
global reputation and compromise its national security. But does the Democratic leadership
share that same vision, or will it simply try to manipulate its supposedly ‘antiwar’ image
— illusory as it is — to advance its narrow and self-serving political ambitions?

While British Prime Minister Tony Blair — hardly known for his
political autonomy — had the audacity to concede to the long-held argument that solving
the Palestinian-Israeli conflict is the key to a stable Middle East, the Democratic
leadership continues to reassert its unwarranted allegiance to the government of Israel.
This latter’s violent, long and cruel occupation of the Palestinian territories has
brought tremendous harm to the Palestinian people, serving as a rallying cry for
anti-Americanism and, indeed, terrorism throughout the Middle East, and far beyond.

Rep Nancy Pelosi, groomed to be the speaker of
the House when the Democrats claim the Congressional throne next year, not only disagrees
with Blair’s recent revelations to the bipartisan Iraq Study Group, but is so archaic and
self- defeating in her ideas that she sounds more like an iconic Zionist figure, than a
moderate American politician. In her speech to the American-Israel Public Affairs
Committee (AIPAC) last year she asserted that, “There are those who contend that the
Israeli-Palestinian conflict is all about Israel’s occupation of the West Bank and Gaza.
This is absolute nonsense. In truth, the history of the conflict is not over occupation
and never has been: it is over the fundamental right of Israel to exist.”

If this supposed ‘progressive’ figure continues to deceive the American
people regarding the iniquitous nature of her country’s role in prolonging the instability
of the Middle East, thus committing America to more violence and counter violence, then,
Pelosi and the entire Democratic Party behind her would find themselves answering to the
same discontented public two years from today. Moreover, if Israel, despite its horrendous
crimes in the region, which again serve as a powerful force behind counter violence and
international terrorism, continues to be treated as a Sacred Cow by American politicians,
then Americans should expect that their country, willingly or not, will ‘stay the course’,
if not in Iraq, then elsewhere.

It is mind-boggling that after so many years, and particularly five
years of reprehensible bloodshed that has been mainly inspired by the Palestinian-Israeli
conflict, few American politicians possess the courage to say it as it is. However, while
discounting this conflict as an ‘internal Israeli affair’ in past years was acceptable by
American political standards, it will no longer suffice. Such a summary dismissal is now
threatening global stability altogether, and will continue to inch America closer to more
pointless, albeit bloody conflicts.

To prevent the exodus of Empire-driven neo-conservative ideologues from
being replaced by self-deceiving, Israel-comes-first Democrats, the American public must
not be satisfied with its democratic revolution of early November. Americans must continue
to push for a truly equitable, sensible and revolutionary foreign policy. It should be one
that goes beyond hollow dictum and reasserts America’s leadership globally. If it fails to
do so, then America’s Middle East conflict will perpetuate at an exorbitant price. This
will be paid by ordinary Americans, and innocent people everywhere.

Ramzy Baroud’s latest book:

The Second Palestinian Intifada: A
Chronicle of a People’s Struggle

(Pluto Press, London) is now available in the US from the University of
Michigan Press and from

Research Articles by Ramzy Baroud

America: Democrats Must Truly Change Course

Center for Research on Globalization – Canada
… the head of the World Bank — at the National
Press Club that Iraq “is not my problem”, and former Defense Department official
Douglas Feith’s abandoning of …


November 25, 2006 at 1:17 am | Posted in Globalization, History, Research, Science & Technology | Leave a comment








Conference "Climate-Policy Induced Technology Exports – Potential and<br /> Risk"

Conference "Climate-Policy Induced
Technology Exports – Potential and Risk". Brussels, 30 Nov. 2006

Urs Springer, Dr.oec.HSG
ECOPLAN – Economic Research and Policy Consultancy

Thunstrasse 22 / CH-3005 Bern (Switzerland)
Tel +41 31 356 61 61 / Fax +41 31 356 61 60 /

Urs Springer

Conference "Climate-Policy Induced Technology Exports – Potential and Risk".
Brussels, 30 Nov. 2006

Conference "Climate-Policy Induced Technology Exports – Potential and Risk".
Brussels, 30 Nov. 2006

Attachment: Climate-policyinducedtechnologyexports-TETRISfinalconference-Brussels30Nov06.pdf
(0.38 MB)

"Urs Springer"

"Climate Change Info Mailing List"

Thursday, November 23, 2006

Dear all,

we would like to invite you to the Conference "Climate-Policy Induced Technology
Exports – Potential and Risk" on 30 November in Brussels (see attached agenda).
Experts from the research and business community will present the results of the EU-funded
research project TETRIS (

The following topics will be addressed:

– Linking domestic emissions trading schemes to the EU ETS

– Does the CDM foster technology transfer?

– How large is the permit supply from CDM and JI?

– Measuring the risks of investing in climate change mitigation

– Impacts of investment risk on CDM, JI and technology transfer

Participation is free. Please register before 28 November.

Best regards,

Urs Springer

Urs Springer, Dr.oec.HSG
ECOPLAN – Economic Research and Policy Consultancy

Thunstrasse 22 / CH-3005 Bern (Switzerland)
Tel +41 31 356 61 61 / Fax +41 31 356 61 60

Conference "Climate-Policy Induced Technology Exports – Potential and Risk".
Brussels, 30 Nov. 2006

Attachment: Climate-policyinducedtechnologyexports-TETRISfinalconference-Brussels30Nov06.pdf
(0.38 MB)

"Urs Springer"

"Climate Change Info Mailing List"

Thursday, November 23, 2006


November 25, 2006 at 12:22 am | Posted in Arabs, Financial, Globalization, History, Islam, Middle East, Philosophy, Research | Leave a comment








The Islamic Mortgage: Paradigm Shift or Trojan Horse?

Sheikh Haitham al-Haddad


Tarek El Diwany


London, UK

25th Shawwal 1427 H

18th November 2006

An article by Sheikh Haitham al-Haddad and Tarek El Diwany on the topic of Islamic home finance has been posted to

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The Islamic Mortgage: Paradigm Shift or Trojan Horse?

All praise is due to Allah and may His peace and blessings be upon our Prophet

Muhammad, his family and all his Companions.

During recent years there has been an unprecedented expansion in the range of

commercial banking products labelled as “Shari`ah compliant” in many countries of the

world. Popular interest among Muslims in the Shari`ah of financial transactions has

increased likewise, and in the United Kingdom the permissibility of so-called “Islamic

mortgages” is among the most frequent topics of enquiry. We therefore thought it

appropriate to record here what we see as the main problems associated with this product

class from the perspective of Shari`ah, knowing that many of our criticisms can be equally

well applied to other types of product that are currently available from the Islamic banking

sector. Scholars who have approved the main forms of Islamic mortgage will no doubt

disagree with some elements of our criticism. We mean them no harm, and remind the

reader that Allah has decreed the existence of differences among people, including

Muslims, as one of the tests by which Paradise may be attained.

Although we conduct a purely contractual examination of the issues, it is important not to

forget the socio-political context of the discussion. Muslims in the West are attempting to

implement certain elements of Shari`ah within an environment that is frequently

inhospitable, and the formulation of an appropriate strategy is therefore rather complex.

The question is not limited to whether particular financial products are contractually valid.

Wider concerns are also in play. For example, is it permissible to establish an Islamic bank

that initially has some dealings with interest if the intention is eventually to become

interest-free? Should we be content with a structure in which an essentially un-Islamic

industry accommodates some Islamic products? Or should banking as an industry be

avoided until a completely interest-free opportunity presents itself? If so, how will Muslims

satisfy their banking needs in the meantime? Perhaps most fundamental of all, is the

Western model of Islamic banking and finance something that can be ‘Islamised’ in the

first place?

When approaching this subject some scholars of Islam may give greater weight to the

surrounding context than they do to narrow contractual issues, particularly in Western

countries where the institutional and legal framework is rooted in practices that are often

prohibited in Islamic law. It is surely unreasonable to expect a wholly Islamic banking

paradigm to suddenly sprout from un-Islamic foundations, and some sort of transitionary

phase is therefore to be expected when developing Islamic alternatives. Moreover, in

many countries of the world, Islamic and non-Islamic, the Muslim community is not in a

position to effect the wide ranging institutional changes that would be required if a

genuine Islamic financing paradigm is to emerge.

Whatever approach is taken to dealing with the problems that face us, we feel that one

key rule to be obeyed is that Islamic principles and teachings should not be twisted to fit

preconceived solutions. The basic Islamic prescription for success in these matters is, as

always, to deal with the causes of a problem and not its symptoms. If we are asked to

provide an Islamic solution to the economic problems caused by interest, without

eliminating interest, then we say that Islam does not have that solution. To those who

argue that “partly Islamic” financial products are an acceptable stepping stone towards an

ideal solution, we respond that such products may already be part of the problem. Many

of today’s Islamic financial products are neither presented nor perceived among the

Muslim population as temporary solutions dictated by force of circumstance. Because of

this, the drive towards improvement in the Islamic finance industry is being diminished. If

existing products are already “Islamic”, why develop new ones?

Now referred to as “home purchase plans” by the UK Treasury and Financial Services

Authority, Islamic home financing products usually adopt one of three basic forms of

Islamic contract. These are murabahah, `ijara wa iqtina (sometimes referred to as ijara

muntahia bitamleek) and musharakah mutanaqissa.

Murabahah is a sale of an item to a buyer at a disclosed profit margin over cost. In order

to implement a murabahah mortgage, a bank will buy from the vendor the property that is

desired by its home-buying client for the agreed price, and immediately sell it to the client

at an agreed profit margin over cost. The home-buyer will pay the price of the property in

installments over several years, and mortgage the property to the bank in order to secure

the installments that are due. Banks that offer this form of finance usually borrow (at

interest on the money market) the amount of money that they use to purchase the

property in the first leg of the murabahah transaction. The installments paid by the client

are therefore set at a level that is sufficient to repay the money borrowed by the bank

from the money market, and provide the bank with a profit on the deal. The installments

paid by the client must be fixed in total (since a contract in which the price is not specified

is invalid under Shari`ah) hence a bank often uses the interest rate swap market in order

to fix its interest costs. By fixing its own borrowing costs, the bank can fix its client’s

installment payments. Rises or falls in interest rates during the term of the murabahah will

not then have an effect upon the cash-flows of either the bank or its client.

`Ijara is a rental of an item by its owner to
a client, and
`ijara wa iqtina is a rental of an

item followed by its sale to the client. In the case of home financing using `ijara wa iqtina,

the bank will buy from the vendor the property desired by the home-buying client at an

agreed price, rent it to the client for a period of years, and then sell it to the client at the

end of the period at a price agreed between them at the outset of the contract. The

client’s monthly payments to the bank will comprise two main payments. One is rent, the

other an amount that is held by the bank as an assurance that the client will be able to

pay for the purchase of the property when required to do so at the end of the rental

period. The “assurance money” is loaned out at interest by the bank to the money market,

producing a financial benefit for the bank. The client’s monthly payment under an `ijara

corresponds approximately to the payments under an amortising interest-based loan in

which capital and interest are repaid in changing proportions over the term of the loan.

This similarity allows a bank to easily adapt its interest-based lending processes to the

requirements of an `ijara mortgage.

Musharakah mutanaqissa is a diminishing partnership between a financier and a homebuyer.

There are several ways in which this partnership can operate. In the case of the Al-

Buraq scheme in the United Kingdom, the bank purchases the property desired by the

home-buying client using its own funds plus a deposit provided by the client. Although

property is registered in the name of Al-Buraq at the Land Registry, the diminishing

partnership contract splits the so called “beneficial interest” in the
property between the

bank and the client so as to reflect the relative size of their contributions to the

price. The client now lives in the property as a tenant and pays rent to the bank. The

amount of the rent is adjusted to reflect the fact that the client owns part of the

interest in the property. In addition to the rental payment, over time the client buys

bank’s beneficial interest in the property and eventually becomes the owner of all of

interest. At this stage, the client’s total rental payment is zero and the final formal
step is

taken of transferring ownership into the name of the client at the Land Registry. It

be noted that in some other diminishing partnership contracts, the property is held by

financier in trust for itself and the client. Of itself, this modification need not
affect the

cash-flows described above.

Ahli United Bank in London offers products that are described as murabahah and `ijara.

United National Bank, HSBC, and Al-Buraq offer what they
call a diminishing partnership

contract. The Al-Buraq contract has been adopted by
Bristol and West, Lloyds TSB and

Islamic Bank of Britain. Until recently, HSBC offered an Islamic
home financing
contract in

accordance with `ijara
wa iqtina
principles, but this has now been
replaced by its

diminishing partnership product.

The Islamic principles of financial transactions are found within a part of Islamic law

muamalat. As a rule, muamalat states what is prohibited, not what is permitted. If a

contract can be shown to contain a prohibited feature, it is deemed void or partly

under Islamic law. The onus is on the one who prohibits to prove his case, not on the

who permits. Hence, it is not for the bank to show that its mortgage product is halal

(permissible). Rather, it is for detractors to show that the product contains a

feature such as riba
(usury, of which the charging of interest is one
form) or

(deception or uncertainty in contractual terms). It is worth pointing out that the
fashion of

issuing religious judgements to approve financial products as halal goes against this basic

legal approach. However, it seems that the spread of riba and
unlawful features within

most contemporary financial transactions has encouraged Shari`ah scholars to issue such

judgments to signify conformity rather than non-conformity.

Islam defines riba in such a way as to prohibit any benefit received by a lender for

giving of a loan, no matter how big or small the benefit. (Riba can also occur in certain

other forms of trading transaction that we do not deal with here.) The main point for

purpose is that modern interest falls under the scope of the riba prohibition. In contrast, a

transaction in which goods are exchanged for money cannot contain riba. This is called

trading. It is however possible that such an exchange will be invalid on other grounds,

such as coercion or misrepresentation. Muslim merchants are therefore allowed to make a

profit by selling goods for more than they purchased them, but they are not allowed to

make a profit by lending money. This is the way in which we may understand the Qur’anic

injunction that:

“… Allah has permitted trading and forbidden riba

from ayat 275, Surah al-Baqarah

Islamic law also prohibits hila (legal trickery) that
can produce a usurious loan from

otherwise permissible contracts. For example, a usury-free loan, a promise and a gift

each permissible in Islam. However, if Person A gives Person B a usury-free loan of

on condition that Person B promises to give Person A a gift of £10 upon repayment of

that loan, then this is clearly a usurious loan when looked at as a whole. It is

prohibited by all schools of Islamic thought that we are aware of. In other words,

combinations of Islamically acceptable contracts cannot be used to defeat the usury

prohibition. In E`lam
, ibn Qayyim

“What matters in contracts is substance, not words and structure.”

Speaking of such contracts in a more general sense, the late Arab scholar ibn

Uthaymeen described modern day Islamic banking as the “usury of deception”.
This he

viewed as more serious a sin than usury on its own, for the former entails deception as

well as usury, while the latter does not attempt to present itself as anything other

what it is. Similarly, at a conference in Dubai during March 2004, Justice M. Taqi
Usmani is

reported to have said that:

“What we are developing now is not fiqh-ul-mu`amalat
(the jurisprudence of financial

transactions), but rather fiqh-ul-hiyal (the jurisprudence of legal tricks)”.

Contract combination has become very common in modern Islamic banking. For example,

in the murabahah model, Person A (the bank) might buy a property for £100,000 from

Person B (the seller of the property) and immediately sell it on to Person C (the

client) at a price of £150,000 to be paid in equal installments over 15 years.

Person C must begin the process by promising in writing that if Person A buys the

property from Person B, then Person C will immediately buy the property from Person A.

The few Shari`ah scholars who approve this transaction say that it is trading (buying

selling of properties), not borrowing and lending money at interest, and that it is

halal. But viewed from the bank’s perspective,
as soon as the bank transfers £100,000 to

Person B, the agreement with Person C automatically comes into effect requiring Person

C to repay £150,000 to the bank at a later date. The transaction is referred to as

“murabahah to the purchase orderer” in the Islamic banking literature.

The contractual documentation used in a murabahah to the purchase
orderer transaction

usually includes an offer letter which states that the bank does not agree to execute

one leg of the transaction unless all legs have been agreed among the relevant parties.

In this way the bank avoids the situation in which it owns the property for any

period of time, and from the bank’s perspective the transaction is merely one of

for more money later”. In effect, the property is used as a means of lending money

interest. The possibility that contracts of sale could be used in such a way was well

recognised by ibn `Abbas. When asked about a piece of silk that was sold for a deferred

price of 100 and re-purchased for a payment of 50 in cash, Ibn `Abbas commented:

“dirhams for dirhams, with a piece of silk in between”.

The use of an offer letter may maintain the appearance that the transactions (property

purchase followed by property sale) are independent and therefore not similar in

to the combination of contracts described above as hila. However, we are not convinced

by this structuring of documents, since the legal effect is identical to the inclusion
of all

legs of the transaction in a single contract. For example, a United Bank of Kuwait

murabahah mortgage offer letter in 1998 states

“We [UBK] will not buy the Property from the Vendor or sell it to you [the Client]
until all

the matters set out in the Schedule of Offer Conditions have been completed to our


We feel that if the obligations of the parties to a given financial product are to be

among more than contract, then it is obligatory for jurists to look at the scheme as a

rather than at its separate components before forming an opinion on its permissibility.

Turning our attention to the method by which rental levels are set in `ijara and

musharakah mortgages, we note that in many
such contracts rent is linked to the London

Inter-bank Offered Rate (LIBOR). This rate is determined on a daily basis for specified

periods going forward. For example, the six month Sterling LIBOR rate for 11 August

2006 was 5.07688%. This means that a person borrowing £100 for the six month period

starting two days after 11 August will pay an annualised interest rate of 5.07688% for

period (approximately £2.54 for the contract in question). Given that we cannot know

what LIBOR will be for any period starting tomorrow or on subsequent days, clients

rental payments depend upon that interest rate are in a position of ignorance as to

their future rental payments will be. With regard to the rental payments, the Al-Buraq

contract states that:

“Before the start of each Rent Period, we will send you an Adjustment Notice

you of the adjusted Rent and Acquisition Payments which will be payable on each of the

Payment Dates in that Rent Period. The rent payable on each of those Payment Dates

will be found by applying the formula P% x AC/12 where P% = the percentage found by

adding LIBOR to the Margin …” [the Margin being an amount added to LIBOR in
order to

provide Al-Buraq with a profit].

Clause 6, Al-Buraq Lease Agreement, 2006

Scholars have argued that setting rental levels in line with market interest rates is
not in

itself haram. They argue this by analogy, on the basis that it is permitted
for a Muslim

shopkeeper to make the same percentage profit selling lemonade as the non-Muslim

shopkeeper makes selling alcohol. However, we identify a rather different and serious

problem arising in the link to LIBOR, namely one of gharar. This is because the client

does not know what rental amount he must pay to the bank until the beginning of each

new period, remembering that the client is contractually bound to rent the property for

subsequent period. If interest rates increase dramatically, then the rental payments

likewise increase and the client may find himself locked into the payment of rentals

he cannot afford. This is one basic reason that traditional scholars in Islam have made

the specification of price a basic requirement of any sale contract. One cannot agree

buy or rent something without knowing the price one must pay. Wahba al-Zuhayli


“… general conditions specify that the sale must not include any of the
following six

shortcomings: uncertainty or ignorance (al-jahala), coercion, time-restriction, uncertain

specification (gharar al-wasf), harm (al-darar), and corrupting conditions (al-shurut almufsida)”

Dr. Wahba al-Zuhayli, Islamic Jurisprudence and Its Proofs, Dar al-Fikr (2003), p. 33

“A sale without naming the price is defective and invalid”

Dr. Wahba al-Zuhayli, Islamic Jurisprudence and Its Proofs, Dar al-Fikr (2003), p. 56

If the home-buying client later decides that he can no longer afford the rental, both

HSBC and Ahli United `ijara contracts require that he or she must guarantee to repay the

cash sum initially provided by the bank to fund the purchase of the property. In those

cases where the property has to be sold to achieve this, the possibility arises that,

property prices have fallen in the meantime, the sale proceeds may not be sufficient to

repay the financed amount. In this case, by requiring the client to make up any
shortfall to

the bank, the possibility of “negative equity” arises, a position in which
the client owes

more to the bank than the property is worth.

Clause 6.3 (d) of the United Bank of Kuwait `ijara agreement
from 1998 provides an

example of the way in which banks seek to protect themselves from capital loss. Here,

bank is allowed to sell the client’s property in the event of default and to subtract

amounts as are necessary from both the proceeds of sale and the on-account payments

made by the client in order to protect the bank from a loss on its investment.

From the Shari`ah perspective, it is clear that a client can only be renting a property
if he

doesn’t own it. Yet if the legal reality is one of rental, a question arises as to why

client must bear the risk of a fall in the property’s price. Those who rent cars from

companies are not expected to compensate the hire company for a fall in the value of

car during the period of the hire. On the other hand, if the client is bearing the risk
of a fall

in property value precisely because he owns the property, then it must be asked why the

client is expected to pay rental to the bank.

In answer to this question some Shari`ah scholars have argued that, in a modern `ijara

agreement, the bank only buys the property and rents it to the client because the

has expressed a need for the property. It would be unfair, they argue, for the bank to

suffer a loss if the client does not proceed to purchase the property at the price
agreed at

the outset of the `ijara.

Once again, we are not convinced by this argument. The essence of an ‘ijara contract

to free the tenant from bearing responsibility for loss or damage to the property
(unless it

results from the tenant’s misuse of the property). A compensation for loss of
capital value

is a condition that defeats the purpose of an `ijara contract, and this kind of
condition is

not permitted in muamalat. Another example would be to sell a watch to a buyer on

condition that the buyer must give the watch back to the seller after one month without

compensation. Such a condition defeats the purpose of sale, which is that ownership

passes permanently to the buyer in return for payment of the price to the seller. If

conditions are to be permitted on the grounds of intention, what is to stop Partner A
in a

partnership from asking Partner B to guarantee him against capital loss, on the basis

Partner A entered into the partnership merely as a favour to Partner B? Such an

argument would be seen as invalid under Shari`ah because it defeats the purpose of

partnership, yet it is almost identical to the argument used by those scholars who

the rights of the bank in the aforementioned `ijara agreement.

Furthermore, an `ijara mortgage typically requires that the client purchases the property

from the bank at the end of the `ijara term as a means of protecting the bank’s original

capital contribution. This transaction, involving a deferred delivery of both

(property and price), has been prohibited by the four main schools of thought:

“Delay from both sides is not permitted by consensus either in corporeal property
or in

liabilities as it amounts to a proscribed exchange of a debt for a debt.”

Ibn Rushd, Bidayat al-Mujtahid (English translation), Garnet (1996), p. 154

The final issue that we wish to address here is the purchase of shares by a home-buying

client under the diminishing partnership form of contract. Here, the price and timing

share purchases is usually fixed at the outset of the contract. We are aware that in

particular case, the price of share purchases is related to the market value of the

underlying property at the time of the purchase, and that in this same case such

purchases are not forced upon the client contractually. This case is however an

and the majority of financial institutions adopt the former model. For example, the Al-

Buraq contract forces its home-buying client to purchase shares in the partnership at

monthly intervals:

“We agree to sell and you agree to buy Our Share of the Property for the
Acquisition Cost

on the terms of this Deed. The Acquisition Cost shall be payable by way of the First

Acquisition Payment, which shall be paid on the date of this Deed; and the Acquisition

Payments … which shall be paid on each Payment Date …”

Clause 2, Al-Buraq Diminishing Ownership Agreement, 2006

It is worth noting that the Shari`ah standards of the Bahrain-based Accounting and

Auditing Organisation for Islamic Financial Institutions (AAOIFI) prohibit the purchase

shares in a diminishing partnership at a price that is fixed in advance. This is on the

that partners in a contractual investment (in this case, a rental property) must share

losses on their investments in proportion to their capital contribution. If one partner

another to buy his shares at a predetermined price, he may effectively be able to

himself against loss, thus breaking the principle of loss sharing that must apply if an

Islamic partnership is to be valid. For example, if two partners put £50 each into a

business partnership, the partnership capital is £100 in total. If it is further
agreed that the

first partner will purchase the shares of the second partner in one year’s time at a
price of

£50, then the second partner has assured himself, contractually, that he cannot make a

loss on his investment in the business. AAOIFI clearly recognises the risk that a halal

partnership contract can be transformed into a riba contract by means of pre-agreed

share transactions:

“It is permissible for one of the partners to give a binding promise that entitles
the other

partner to acquire, on the basis of a sale contract, his equity share gradually,
according to

the market value or a price agreed at the time of acquisition. However, it is not

to stipulate that the equity share [sic] be acquired at their original or face value,
as this

would constitute a guarantee of the value of the equity shares of one partner (the

institution) by the other partner, which is prohibited by Shari`a.”

AAOIFI Shari`ah Standards 2003 – 2004, section 5. Diminishing Musharakah, p. 214

The diminishing partnership contracts that have come to our attention protect the bank

from capital loss on its share of the partnership by various means and to varying

under English law. In the event of a deterioration in the United Kingdom property

Muslims who default under such contracts may therefore find themselves required to

guarantee the bank’s original capital contribution to the property purchase. If

prices fall sufficiently far, the position of negative equity that was described
earlier could

become widespread. This would no doubt be an unexpected surprise for many clients,

given the language of “risk sharing” that typically accompanies Islamic home


In summary, we believe that any Islamic home financing scheme in which the financing

organisation stipulates conditions to protect itself from a negative return on capital

equivalent to an interest-bearing loan. Contracts in which the financier buys a
property for

a client while requiring the client to buy it back at a higher deferred price are the

common (but not only) means of implementing such loans. In these cases, the property is

used firstly as a tool to transact the loan, and secondly as a means of securing it.

Given that it is possible to produce genuinely Shari`ah compliant Islamic property

financing contracts under English law, we feel that to permit the present range of

products on contractual grounds is a flawed strategy for the Muslim community to

The risk is that the benefits possible under a proper implementation of Islamic finance

not emerge, and that what could have been the beginning of an interest-free economic

renaissance will in fact become a mechanism for its suppression.

Allah knows best and may His peace and blessings be upon our Prophet Muhammad, his

family and all his Companions.

Sheikh Haitham al-Haddad


Tarek El Diwany


London, UK

25th Shawwal 1427 H

18th November 2006

The Islamic Mortgage: Paradigm Shift or Trojan Horse?

Thursday, November 23, 2006

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