Shariah Finance Imposed in U.S., Courtesy of a Colorado Real Estate Company

by CHRISTOPHER HOLTON August 18, 2009
Apparently, the Kuwait Islamic Bank entered into a joint venture with Colorado-based real estate company UDR, which brings to mind some crucial questions. What, if any, restrictions would be imposed on the real estate properties in which Kuwait Islamic Bank invested here in the United States? I made an inquiry via UDR’s “contact us” form on the company’s web site.
The company was quick to reply as, within minutes, we received a phone call from Dave Messenger, CFO of UDR.
I asked Mr. Messenger two questions:
1. What, if any, special restrictions or qualifications relating to Shariah were required in the deal with Kuwait Islamic Bank?
2. Are zakat payments to be made as part of this venture?
Mr. Messenger did not attempt to address question number two, but referred me to Kuwait Finance House to get an answer to that question.
Mr. Messenger was also quite insistent that UDR’s agreement was in fact with Kuwait Finance House and not with Kuwait Islamic Bank. This is a distinction without a difference, since Kuwait Finance House is an arm of Kuwait Islamic Bank. In all the media being devoted to this new deal, the entity identified is in fact Kuwait Islamic Bank.
Mr. Messenger was able to provide much more information in response to question number one.
His answer was troubling, right from the outset.
First of all, he mispronounced “shariah.” Shariah is pronounced shu-ree-uh. Messenger pronounced it shu-rye-uh.
It does not inspire a great deal of confidence in terms of due diligence when the CFO of the American entity which entered into the agreement with an Islamic bank cannot even correctly pronounce the name of the underlying doctrine which governs their joint venture partner.
Messenger was not bashful at all about the issue of Shariah-compliance.
He declared that the entire agreement was written to be Shariah-compliant to make sure that the joint venture properties fit in with their partners’ religion.
When asked about specific provisions which he knew about to establish and maintain Shariah compliance, Messenger named two: “cinematography and food served on the property.”
I asked what he meant by cinematography and he explained that some of their properties include movie theaters.
Evidently, Kuwait Finance House/Kuwait Islamic Bank wants to make sure that no offensive movies are shown on properties in which they invest.
In terms of “food served on property,” Messenger explained that no pork would be served on the property at functions put on by UDR.
I asked him if any of the properties leased to sandwich shops or delis or such. He said that eight of their 160 properties did have such tenants.
Again, evidently, those businesses would be prohibited from serving pork to prevent any conflict with Shariah or the religion of UDR’s venture partners.
Messenger explained that potential conflicts with Shariah were addressed up front with the JV partners and would continue to be addressed up front to prevent conflicts.
What has clearly happened here is that Kuwait Islamic Bank has been able to impose Shariah here in the United States by using its financial leverage over UDR.
This is the essence of Shariah-compliant Finance. Contributing Editor Christopher Holton is a Vice President with the Center for Security Policy. He can be reached at He also contributes to the website Shariah Finance Watch.

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