"Under Shariah, or traditional Islamic law, charging interest on a loan is taboo, but Muslim businessmen have created sukuk, which are financial instruments that can enable a return on principal. Less than a year ago, during the worst days of Dubai's financial crisis, it seemed likely that lawyers would turn Dubai into a laboratory for thrashing out the consequences of defaulting sukuk. Now, though, the worst of the financial crisis in Dubai has passed, with a minimum of such thrashing.
According to Mohammad Saeed Rahman, founder of Portland Oregon's Institute of Halal Investing, Dubai has turned the corner, and government-controlled company Dubai Holdings 'will satisfy its bondholders with hybrid payments, 30% to 40% in cash, and issuing new securities for a longer period of time to restructure the remainder of the debt.'
While the worst of the crisis may be past for the emirate, Dubai has highlighted some issues underlying the Islamic world's integration with worldwide finance. The rejection of riba (translated from the Arabic as 'usury' or 'interest') and the rejection of gharar (translated as 'the sale of uncaught fish,' which indicates risky trading) are among the defining principles of Shariah finance. So the question emerges: how can sukuk avoid riba or gharar?"
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