Over time, scholars in some Arab Muslim nations deemed a small number of investment practices asSharia-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.

And these investors have. In 2006, there were 250 Islamic mutual stock funds worldwide with combined assets of $300 billion, according to Moody's. Overall, the Islamic finance industry may be growing as much as 15% annually. Deutsche Bank, HSBC, UBS and other banking giants have established Islamic finance subsidiaries or separate Islamic banks that offer products that comply with Sharia.

But it is Malaysia that stands at the forefront of this industry, which was virtually nonexistent before 9/11. Malaysian leaders recognize that Islamic finance allows Muslims to assert their religious identity without having to become involved in poisonous Islamist politics. Malaysian Prime Minister Abdullah Ahmad Badawi says as much when he embraces "civilizational Islam" -- Islam expressed through economics, science and culture, not just politics.

http://www.latimes.com/news/opinion/commentary/la-op-kurlantzick10feb10,0,3624417.story