The Little Book of the Shrinking Dollar: What You Can Do to Protect Your Money Now

Why You Might Try a Shari’ah Bank

I know this next one might sound really crazy to you, but hear me out. After all, it’s not like you have to bank in Iran to make this work. Try Jakarta or Singapore, places where British common law still keeps order.

Shari’ah banking ethics came to be in order to comply with the Koran’s laws against usury and other similar practices. So for example, say you want to buy a Rolls Royce. Instead of lending to you directly and charging you interest, a Shari’ah bank will buy the car for you, and sell it to you in installments at a higher price than they paid. That’s how to get around interest.

But here’s what really matters. Shari’ah banks are criticized for doing too much plain vanilla lending. To my mind, that sounds like a big positive. In fact, the bank treats its account holders like shareholders. They’ll keep your money safe, and they’ll give you a share of the profits in lieu of interest. When it comes to lending, the bank and entrepreneur both share the reward and failure. That’s not like your typical big Western bank like Bank of America that can slice and dice every loan and parcel it into derivative sausage.

After all, profit and loss are the most efficient regulators. This injunction against interest also keeps Shari’ah banks from dealing with the central banks when it comes to emergency lending windows and the like—all the offerings (read: bailouts) that have kept the poison directly on the books of all major U.S. banks—or worse—transferred ...