Going Global, Part 9: Islamic Bonds

Earlier this week, the Wall Street Journal, published a fascinating story on the market for corporate bonds that comply with the standards of Islamic law. Paying and collecting interest are "haram," or forbidden, to devout Muslims, creating an awkward situation for entrepreneurs in search of capital.

Malaysia, which is generally more liberal in these matters than Gulf states, led the way in creating financial products that conform to the Quran's standards. While these products are loans in all but name, they have helped make Kuala Lumpur a booming center for international banking, making it much easier for local businesses to find seed funding. As Nitasha Tiku and I discovered in our reporting, Malaysia presents other opportunities for entrepreneurs: strong high-tech and telecom sectors, as well as lots of incentives for foreign companies.

Of course not everyone in the Islamic world agrees with the Malaysian interpretation, arguing for a stricter regulations against money-lending. The following is a defense from an employee of the country's central bank:

"It's all about the journey you take to that destination," he says, drawing a parallel between financial gain and sex. A seeker of sexual pleasure, he explains, can get married or fornicate on the side -- just as a seeker of financial gain can profit from an Islamic sukuk or a conventional bond. "You'll have enjoyment in both cases," Dr. Daud chuckles, "but one is halal [permissible] and the other is not."

I'll admit that corporate bonds are pretty exciting, but Dr. Daud may be stretching this analogy too far. That said, this story is worth a read as an example of how entrepreneurship can cause people to rethink deeply entrenched beliefs.

Senior contributing writer Max Chafkin has profiled companies such as Yelp, Zappos, Twitter, Threadless, and Tesla for the magazine. He lives in Brooklyn, New York. @chafkin