Profit versus the prophet

On a humid morning in downtown Kuala Lumpur, women wearing patterned head scarves and long skirts walk in groups to work, strolling beneath a futuristic, Epcot-esque monorail and past neatly trimmed coconut palms. One cluster of women stops for lattes at a Starbucks, one of many cafes blossoming on the ground floors of new glass-and-steel corporate skyscrapers in the Malaysian capital. Young male information-technology workers sit in shorts at the Starbucks' outdoor patio, furiously typing on computers. When the call to prayer rings overhead, several of them quickly down their espressos, pack up their laptops and hurry to the mosque.

Since 9/11, Muslims -- and many Westerners -- have wondered if Arab Muslim nations can reconcile Islamization and globalization. To some, Malaysia has found the balance of the two, creating a country comfortable for pious Muslims and for a company such as Intel, which has built a huge microprocessor plant in the northern city of Penang. The White House has praised the small Southeast Asian nation as a model of moderation. Malaysia has benefited enormously from globalization, throwing itself open to trade, building a high-tech corridor and growing into one of the wealthiest nations in the region. Yet it has boomed in part by embracing one of the oldest concepts in Islam -- Islamic banking.

Islam has had its own concepts of banking and finance for centuries. The Koran, striving to promote equity, prohibited the charging of interest on loans because poor borrowers and wealthier lenders did not face equal risks. It also barred Muslims from making money off such products as alcohol because Muslims are not allowed to drink alcohol.

Over time, scholars in some Arab Muslim nations deemed a small number of investment practices as Sharia-compliant. In an Islamic financial transaction called musharakah, for instance, the lending Islamic bank and the borrowing company pool their capital, rather than the bank providing the loan at a fixed rate. The bank and the company jointly manage the money, so both profit or lose equally from the investment.

Before 2001, most Arab Muslim investors did not use transactions like musharakah. Instead, they placed their savings in Western banks. But that has changed over the last six years. One reason is the skyrocketing price of oil, which has fattened the coffers of many Arab governments and investors and given them more money to invest, including in Islamic banks. After 9/11, many leading Muslim investors also pulled out of the United States because they feared their money would be targeted. Finally, the growing power of Islamists put pressure on Muslim investors to save according to Koranic principles.