By REGINALD STACKHOUSE

TORONTO, ONTARIO – When we learn that Muslim Canadians want to start a sharia bank (a financial institution governed by Islamic religious law), our immediate reaction does not have to be that it’s one more assault on the Canadian way of life. Nor must we write it off as unpractical because Islam’s social ethic forbids charging interest on loans.

Let’s remember that chartered banks are already not the only options we have for financing ourselves. There can be room for one more. As well, let’s note that a ban on interest was imposed for centuries in Europe by both church and state. That ban is even as old as the Old Testament, which forbids Israelites from charging other Israelites interest.

So, this alternative way of financing one another has a long and diverse pedigree.

Subtle philosophical arguments against interest were advanced long ago by some of the West’s most respected thinkers, such as Aristotle and St. Thomas Aquinas. Medieval popes and church councils inveighed against it for more than 1,000 years. Penalties were often imposed against usurers, as all financiers were labelled if they charged interest. The idea may come as a shock to us in an age when paying interest is as much part of everyday life as borrowing money is. But if it’s new to most of us, it’s not new to history.

Yet, we still have to wonder: Is it practical?

History not only shows that this option has been around a long time but also that a lending institution can actually stay in business without levying interest. One way is by allowing loans when the lender and the borrower share both reward and risk. If you borrow $100,000 to buy a truck and set yourself up in the transport business, for example, this kind of bank can take a slice off the gain you accrue by buying the truck. And it will also share the loss if your business tanks.

Sound convincing? Maybe not, and it’s not the whole story — not in the West, anyway. In the medieval centuries, charging interest was preferred so much by financiers that they used ingenious ways to evade the law. Loans were made, for example, with a built-in return to the lender without actually levying an interest charge. To make a loan, let’s say, of $100, the lender might give you only $90 but you would sign a commitment for $100. Or, as well as advancing the loan, he might sell you a piece of furniture for more than its market price and take his profit that way. To move goods around Europe, a merchant might also commit himself to paying the receiver more than they were worth.

Then, as now, any ban invites the ingenious to devise a way of getting around it. Yet, it can also work and make financing available without gouging the person who needs it. Muslim experience can show us that, too. Should Canada allow it to happen?

An economy’s dynamism depends on giving people access to credit whether it’s to finance a corporate takeover in the billions or just to buy a car. As we’ve seen in the past few weeks, closing credit opportunities at top or bottom can put our economy so close to the brink that the world’s central banks have to rush in.

So Canadian officials are right to take a look at this sharia option. Providing an alternative to the chartered banks and insurance companies has been a recognized need for a long time. That’s why credit unions and housing societies emerged in so many Western countries. It’s why the women of so many Third World villages came up with ways of making loans at small interest rates to other villagers. It’s why home-owning became a possibility for ordinary Canadians when National Housing Act financing appeared on the scene.

Does that mean putting out the welcome mat for a sharia bank? Not necessarily. It means taking an informed look at what it can do for people who need financing. It means the Office of the Superintendent of Financial Institutions taking a “let’s get the facts” look at the idea.

It just might be a good one. If it isn’t, OSFI has enough number crunchers to warn the country off. Prejudging something just because it’s new and different is never good business. If it were, we might not have the wheel.

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