The $1.6 billion restructuring of Bahrain-based Arcapita Bank B.S.C. has a significance that extends far beyond simply returning value to its creditors.
Arcapita was established in 1996 as the world’s first Islamic investment bank. This means it had to comply with principles set out by Islamic law, known as Shariah, such as a ban on the payment or receipt of interest. But these Islamic principles are not actually codified in law—they are more a set of moral and religious guidelines. There isn’t even a Shariah court; each financial institution has its own Shariah board, consisting of Islamic scholars, which interprets the rules and ensures its company’s compliance.
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