Building up national Champions to grow Islamic economy
There is nothing wrong with adapting efficient and successful modi operandi from the world of the conventional finance. Well, at least as long as they become and/or stay Shariah compliant.
Many well-off governments of the Organization of Islamic Cooperation countries had officially declared their support for the Islamic economy on numerous occasions. But aside from Malaysia, there seems to be very little debt and equity support for Shariah compliant businesses coming from the countries’ budgets.
Most of us admire Tesla and Space X; a fewer actually like Elon Musk. But these fabulous projects would had never taken off without the direct support from the US government. According to the Los Angeles Times, both companies received an estimated US$ 4.9 billion in state support. That support included grants, tax breaks, factory construction assistance and environmental credits that Tesla sold. Additionally, it also included tax credits and rebates to buyers of solar panels and electric cars. And there was even a subsidized loan for US$ 465 million. Apparently, the considerations for job creation, supporting the US innovation, and ecological concerns justified such lavish expenditure of tax-payers cash. Now the private money are stamping out competitors to the state-financed industry Champion.
Let’s move into the Shariah compliant world. Would it not be great if meem (Saudi Arabia) and ALAMI (Indonesia) with its newly acquired bank, would both receive government funding in order to outcompete each other to become the world’s leading Islamic challenger bank? Would it not be exciting to see Malaysia squaring off with Russia to provide financial assistance to GlobalSadaqah and PayZakat respectively, or the government of the UAE trying to best the UK through supporting Wethaq (UAE) and Al Waseelah (UK)?
How to fund such “financial profligacy”? With sovereign Sukuk, of course. I know of a very few private equity and venture capital funds that actually lose money, so the Sukuk is likely to be repaid. Also, the authorities all over the world are thoroughly concerned with employment, the increase in tax base, multiplication effects of any single business development, as well as some intangibles, such as technological superiority and the premier status in Islamic Tech.
Islamic finance is fair but complicated. And having an extensive government equity participation (as a seed investor, or a later stage one to accelerate exits) will equate the playing field with the conventional players. Our state-assisted national Champions will have a “pull effect” on the entire Islamic economy. And by the way, in 2020 even the Federal Reserve System started buying the techie bonds from Apple, Microsoft and Amazon.
