Banking on a Prayer

Discussing religion in any context is like treading on a minefield. To add money to the mix can only make it more toxic. And yet there are times when that seemingly odd intersection is very much in the news and demands consideration.

Two new books currently generating buzz among the literati (if not among financial services types—yet) take on exactly this subject, albeit from very different perspectives. What’s truly fascinating is how, in many ways, they’ve quite similar, and how is many ways they’re not.

‘Heaven’s Bankers: Inside the Hidden World of Islamic Finance,’ by Harris Irfan takes on a world that may be largely unknown even to many who have spent a career in financial services. The author has his own consulting practice specifically in this field, and previously ran Islamic finance groups at the conglomerates Deutsche Bank and Barclays. The other book is ‘God’s Bankers: A History of Money and Power at the Vatican,’ authored by veteran investigative reporter Gerald Posner.

To be clear, the books use very different approaches. For one thing, the Vatican Bank’s financial dealings have been covered extensively in the past. However, true to his journalistic roots, the author of ‘God’s Bankers’ uncovers numerous fascinating details about the sometimes-unsavory practices at this cloistered institution. Some of it seems almost cinematic, and indeed, movie buffs might remember that it was a key plot point in the final film of the Godfather trilogy.

By contrast, ‘Heaven’s Bankers’ offers an invaluable primer for the many readers who are unfamiliar with the entire field. It offers a historical perspective on the theological principles guiding Islamic finance, and delves into contemporary operating practices. Many will likely be surprised by the sheer scale of the activities.

Of course, there are some similarities. Christianity and Islam both have strict restrictions against the practice of usury, which mandates some tortured justification to enable many of the initiatives that are regularly undertaken. Islam even forbids the practice of making money from money, which makes mortgages, for example, a complex undertaking. As for the Vatican, the author quotes ­Archbishop Paul Marcinkus, who ran the Vatican Bank for 18 years, as saying that “you can’t run the church on Hail Marys.”

More to the point, while everyone but insiders might see most such activities as being steeped in ancient tradition, the reality is that these institutions are relatively new.

The current version of Islamic finance only goes back to Egypt in the 1960s, the result of an unlikely experiment. It then expanded into the other regions of the Middle East before actually receding in the 1980s. It re-emerged a decade later and today it’s a trillion-dollar industry. The fixed-income product known as sukuk is issued not only by Muslim governmental agencies but also by governments as disparate as Luxembourg, South Africa and England, as well as some private sector corporations.

Similarly, the Vatican Bank was founded in 1942 and was by no means insulated from the World War raging at the time. Moving forward, its internecine dealings became deeply enmeshed in deal-making that was ambiguous as best and potentially criminal at worst.

Those interested in this fascinating subject should pick up the books for themselves. The unmistakable takeaway is that banking doesn’t function in a vacuum—it is fundamentally a product of, and in turn influences, every other sphere of contemporary behavior. Just as backroom politics drive compliance mandates and the habits of fickle millennials energizes mobile transactions, it’s unrealistic to assume that banking and religion are disconnected.

In the past two decades, the Internet has had the effect of virtually eliminating previously sacrosanct geographic boundaries and ushering in new levels of financial activity, all while demanding a high level of transparency. That’s what the modern world is all about. Meanwhile, there will be new financial opportunities coming into the market via these hallowed institutions, and contemporary practices will be guided by ancient traditions. It will be interesting to see how these contradictory forces play out.

Written by Jack Dougal

Jack Dougal

Jack Dougal is's resident news reporter. He writes regular blogs covering the latest stories and key developments in the global financial services industry.

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