Bi ismillahi rahmani raheem
assalamu alaikum
i dont necessarily agree with everything in this article.
Islamic Banking: Opportunity or Threat?
If implemented correctly, Islamic banking and
finance should be able to co-operate and co-exist with any kind of
capitalism, while still adhering to ethical guidelines set by Islamic
Sacred Law
by RODNEY WILSON
Islamic banking, which implies the avoidance of interest, has become a
substantial industry during the last four decades. One obvious question
is whether its emergence further segregates Muslims from Western values
and norms, creating a financial ghetto. An alternative view is that as
increasing numbers of people in the West are dissatisfied or skeptical
about the banking services they receive, and see them as exploitative
or even unethical, the emergence of Islamic banking with its own
distinctive morality results in Islam projecting a much more positive
face.
Many Western bankers view Islamic finance as a curiosity, and perhaps
even a business opportunity, but seldom as a threat comparable to that
from Muslim extremism. Indeed, Islamic banking and finance can be
regarded as a gentler aspect of Islam, and one that lends itself to
dialogue between Westerners and Muslims.
Islamic retail financial institutions, including the Islamic Bank of
Britain, the European Islamic Investment Bank, and Lariba Bank in
California, are now well-established in a number of Western countries.
Furthermore, the leading international banks, including Citibank, HSBC
Amanah, Deutsche Bank and UBS of Switzerland, all offer Islamic
deposits and Shari'a-compliant financing facilities.
There has been much dialogue between the Western bankers working in
these institutions and the Shari'a scholars who advise what is, and
what is not, permissible. This dialogue extends to insurance, where
Islamic takaful companies have become increasingly active, their
distinguishing feature being that they do not hold conventional
interest-yielding bonds, and that shareholder funds and premiums paid
by policy holders cannot be co-mingled, which could result in the
former exploiting the latter's misfortune.
As Shari'a is about universal, divinely inspired principles rather than
national laws, leading international law firms have also become
involved in Islamic banking and finance, as contracts need to be
drafted under English or American law in a way that is consistent with
Shari'a. Indeed, the main job of the Shari'a committee members who
serve on the boards of Islamic banks and conventional banks offering
Islamic products is to ensure that new contracts are compatible with
Shari'a principles and, if they are not, to pursue a dialogue with the
lawyers concerning amendments and redrafting.
The aspiration of many Islamists is to have divinely inspired Shari'a
replacing man-made laws, perhaps even the establishment of a universal
caliphate under which everyone, Muslim and non-Muslim, should live. Not
surprisingly, such an aspiration is unacceptable for most non-Muslims,
and indeed for many Muslims, as it denies choice.
Islamic banking and finance can point to the way forward: it is about
extending choice, not restricting options. As each institution has its
own Shari'a board, Shari'a compliance is effectively privatized, rather
than being a matter of national law. Indeed, each Shari'a board passes
its own fatwas, or religious rulings, which further extends choice in
the marketplace for religious ideas. Religion, of course, flourishes
under competitive conditions and Islam is no exception, whereas when it
is nationalized, its adherents soon become alienated.
The Islamic Republic of Iran can be regarded as an example of how not
to encourage the development of Islamic banking and finance. There, all
banking has been Shari'a - compliant since the Law on Interest Free
Banking was passed in 1983. Bank clients have therefore no choice but
to use the Shari'a system. The banks, however are state-owned and have
little autonomy, even in determining what deposit and financing
products to offer. They also do not have Shari'a committees, the
argument being that this is unnecessary as the law ensures Shari'a
compliance in any case.
The result has been that banking development has been slow, there is
little financial innovation, and most Iranians do not have bank
accounts. In contrast, on the Arab side of the Gulf and in Malaysia,
where Islamic and conventional banks compete, Islamic banks have
attractive products on offer and a growing client base. Al Rajhi Bank
of Saudi Arabia has become the world's largest Islamic retail bank, and
its range of services and delivery channels compares favorably with the
best that Western banks can offer.
Islamic banking is here to stay, it is an opportunity rather than a
threat, and it has an exciting future. Gaps remain-there is no Islamic
bank in Israel, for example, to serve its Muslim population. But if the
Central Bank of Israel licensed such an entity it could create much
goodwill. It might also encourage the Jewish population living there to
question whether the operations of their own banks are compatible with
religious teaching in Leviticus and Deuteronomy.
Ultimately Islamic banking and finance is about the emergence of a
distinctively Islamic form of capitalism that may co-exist and interact
with Western, Chinese, Russian or any other capitalism. Such a
development should be welcomed and facilitated, and not hindered or
suppressed.
Rodney Wilson is director of postgraduate studies at Durham
University's Institute for Middle Eastern and Islamic Studies. He is
co-editor of The Politics of Islamic Finance and co-author of Islamic
Economics: A Short History.
This article has been published courtesy of the Common Ground News Service
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Rasul Allah (sallah llahu alaihi wa sallam) said: "Whoever knows himself, knows his Lord" and whoever knows his Lord has been given His gnosis and nearness.
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