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Lets bank the Islamic way?

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Is Islamic banking missing its main chance in wake of protests against conventional banking?

By MUSHTAK PARKER | ARAB NEWS
Published: Oct 23, 2011 23:28 Updated: Oct 23, 2011 23:28

The poster carried by a smiling woman near the London Stock Exchange last week as part of a wave of protests by ordinary people in tens of cities the world over campaigning against the excesses and perceived greed of bankers and the collusion and inefficacy of politicians in dealing with the financial and economic crisis, simply read "Let's Bank the Muslim Way?".

The woman, who one assumes was not a Muslim, was obviously referring to Islamic banking, whose potential role as an alternative financial system which connects banking and finance to real economy activities and which proscribes the receiving and paying of interest (Riba) and therefore speculative activities based on gambling, has come to the fore ever since the global financial crisis surfaced in 2008.

But whether the Muslim countries and the Islamic banking industry are rising or even capable of rising to the challenge remain a moot point. Whether it is at the Annual meetings of the World Bank/International Monetary Fund or the G20 meeting, whose members include three important Muslim countries in Saudi Arabia, Turkey and Indonesia, any talk of a potential role for Islamic finance, especially raising finance through a proven and increasingly popular off balance sheet mechanism such as sukuk issuance, is conspicuously absent. Muslim countries, it appears are either embarrassed by the attention Islamic finance is receiving or are living in denial because it may not be perceived as cool in the bastions of the Dar Al-Riba.

Contrast the utterings of two leaders at meetings last week - one Luc Frieden, the finance minister of Luxembourg, a Christian country which is trying to eke out a role as a European hub for Islamic finance especially as a domicile for funds and for sukuk listing, and the other King Hussein of Jordan, the ruler of a Muslim kingdom faced with dire economic and youth employment problems.

Frieden, leading a Luxembourg financial delegation to Singapore, Malaysia and China on Oct. 17 to Oct. 20 to promote the Duchy as a major international financial centre, was unashamedly unequivocal about the value and the potential contribution Islamic finance can make to economic growth and financial stability.

Speaking at a financial forum in Kuala Lumpur, Finance Minister Frieden declared that "Europe can indeed learn a lot from Islamic finance through its principles of financial partnership between the creditor and the debtor; the absence of speculation and respect for ethical principles. The provisions against speculation and gambling which is prohibited in Islamic finance, is what we can concentrate on. The elements of ethical principles should not be limited to Islamic finance alone," he explained.

He reiterated the willingness and the policy of the Luxembourg government to develop Islamic finance in the context of the strategy of diversification and internationalization of the Duchy as a major global financial center. "Islamic finance has a growing interest in the international financial community, mainly because of the stability it has shown throughout the financial crisis. Islamic finance is now a component of more and more important in a diversified portfolio of assets. Working together we enrich our cultures and use our various financial products to contribute to the prosperity of all humanity," he added.

On the other hand, the words Islamic finance was nigh absent from the agenda and the speech of Jordan’s King Abdallah when he opened the World Economic Forum's special meeting on “Economic Growth and Job Creation in the Arab World” which took place on Oct. 21-23 at the Dead Sea in Jordan.

"Our region stands today at the gates to the future," said the King, noting that there are "four gates or crucial areas for consideration: Dignity, opportunity, democracy, and peace and justice." King Abdallah emphasized that the region urgently needed economic growth, and that it has one of the world's highest youth unemployment rates, which is estimated between 25 percent to 40 percent.

The region, he maintained, required entrepreneurs, innovators, educators and policy-makers to create in excess of 85 million new jobs that are needed especially for the youth, who make up to 65 percent of the Arab population.

Corporate participants were equally disappointing in their perception and appreciation of the role Islamic finance industry can contribute to employment generation. In Malaysia for instance, the Islamic finance industry accounts for a 22 percent market share of the total banking sector, but provides over 35 percent of employment in the financial sector. Similarly, the financing and credit the sector extends to the general economy has a multiplier effect on employment in general.

Even Mohamed Al-Mady, vice-chairman and chief executive officer, Saudi Basic Industries Corp. (SABIC), which has already issued three major sukuk issuances, failed to note the growing role Islamic finance is playing as a diversification tool of sources of funding for global and local corporations.

The plenary sessions once again highlighted the increasing lack of efficacy of the WEF as a global platform to discuss the pressing issues faced by the world economies.

Even in the “New models for economic governance, and other sessions, Islamic finance was hardly on the agenda, even though topics such as enhancing institutions; addressing social and economic inequities; and building an inclusive private sector were addressed.

The only fleeting reference to an Islamic financial concept was the institution of Waqf (endowments). "Arabs," stressed a WEF communiqué, "should identify whatever is valuable in their own heritage and useful to solving today's problems. One suggestion was to revive the status and role of the Waqf system, an endowment that not only supports and finances religious services, but also non-religious, charitable services, and which encourages the wealthy to give back to society through donations to the Waqf."

The WEF has had the odd session on Islamic finance at its forum in Davos in the past. But judging by the transcripts, the level of debate has been woefully superficial and parochial, with the implication that Islamic finance has only got something limited to offer the Muslim countries and not beyond. This is because the phenomenon has grown rapidly in the Muslim world overt the last decade or so and that it is now getting into the mainstream banking sector in these countries. However, its scope is limited because of various legal, regulatory and market constraints and because its market share of banking system assets is still low compared to the conventional banking sector.



© 2010 Arab News

Eco_Is-Islamic.jpg
 
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The ideology of bait-ul-mall can be possessed until the time of Imam Mehdi A.S.
 
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How is a no profit banking supposed to work?

Commiteyan pan verga kamea....is it not?it slike putting money in a kitty committee tht women usually indulge in. Doesn't help generate monetary value imo..

Still idk much about this ...anyone willing to explain clearly?
 
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the lesser the interest rate the more will be the buying power of country
Islamic banking have concept of sleeping partner... and "ijtimayyat" but no "money on money" is allowed
 
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How is a no profit banking supposed to work?

Commiteyan pan verga kamea....is it not?it slike putting money in a kitty committee tht women usually indulge in. Doesn't help generate monetary value imo..

Still idk much about this ...anyone willing to explain clearly?

there is no interest in islamic banking, but rather, the loss and gain is shared by both the lender and borrower. Although it also need to be regulated properly like the current banking systme, otherwise it can also create a problem like what we see now.
 
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there is no interest in islamic banking, but rather, the loss and gain is shared by both the lender and borrower. Although it also need to be regulated properly like the current banking systme, otherwise it can also create a problem like what we see now.

Im sory ...but i fail to understand the bold part....losses and gains on what..

if lets say i invest in a product ..it fails miserably ..do my loses get shared by the bank from where i loaned my money?
or do the gains i made on the money get shared evenly? ...tht would be extortion lol (Joking:P)
 
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Interesting that now that Western economies are on their way to becoming net debtors, they find securing "credit" without the cost of credit, ie Interest, to be most welcome and our islamican brigade who seem to forever inhabit insecurity, can claim yet another victory as they get taken to the cleaners -- victory for ideology over experience.

See friends, in economics and in banking - 2 plus 2 had better equal 4 - now whether you hold your nose by twisting your arm behind your head or raising your hand to hold your nose - in the end, it's really the same -- SO call it whatever you want, Islamic, Christian or martian, 2 plus 2 will equal 4 - shai'if ?
 
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How is a no profit banking supposed to work?

Commiteyan pan verga kamea....is it not?it slike putting money in a kitty committee tht women usually indulge in. Doesn't help generate monetary value imo..

Still idk much about this ...anyone willing to explain clearly?

Profit is not discouraged, just no interest.

In very simple terms you can grant loans against tangible equities selling the customer an end product on installments for a profit.

Look the end result is not so much different to the buyer but on the industry level its a major paradigm shift. I mean if you buy a car for say USD 50,000 on a loan of 5 years. You may end up paying USD 5000 more on the car from either banking systems. But since you're doing something Islamic you're also bound by laws that would have to make practices more ethical.

You won't see massive profit rates being taken as Islam regulates how much profit you can earn on your goods, sustainable loans are offered... Getting a loan is a little tougher as well, since the banker will ensure you can pay back the loans and will only lend if they have the capability to seize your assets or equities.
 
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In very simple terms you can grant loans against tangible equities selling the customer an end product on installments for a profit.

Look the end result is not so much different to the buyer but on the industry level its a major paradigm shift. I mean if you buy a car for say USD 50,000 on a loan of 5 years. You may end up paying USD 5000 more on the car from either banking systems. But since you're doing something Islamic you're also bound by laws that would have to make practices more ethical.


So, in other words, I will chose to call "Interest", "Profit" and that makes it "Islamic"?? Wah, Saeb - islam for idiots ?

In fact what is being claimed as Islamic in the case of Islamic banking is a brand new formulation of Islamists - The three montheistic religions have strong admonistions and sanctions against USURY and not interest, but our Marxist inspiried ideologues of Islam-ism wish to market this rubbish as if it were Islam they were marketing .
 
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In an Islamic mortgage transaction, instead of loaning the buyer money to purchase the item, a bank might buy the item itself from the seller, and re-sell it to the buyer at a profit, while allowing the buyer to pay the bank in installments. However, the bank's profit cannot be made explicit and therefore there are no additional penalties for late payment. In order to protect itself against default, the bank asks for strict collateral. The goods or land is registered to the name of the buyer from the start of the transaction.

ok i got this from wikipedia

But lol its like just evading Islamic technicalities, the lender gain a margin via buying the goods urself lol ...and tht profit is not interest?
This is really funny tho.. this way ends up with gaping loop holes that can be easily exploited and relies solely on the modesty of the transactors ..

On the bright side ...they insure a strict collateral connection ,so as to Repo it if the buyr fails to return on profits or the money.
Isent that haram?
 
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So, in other words, I will chose to call "Interest", "Profit" and that makes it "Islamic"?? Wah, Saeb - islam for idiots ?

In fact what is being claimed as Islamic in the case of Islamic banking is a brand new formulation of Islamists - The three montheistic religions have strong admonistions and sanctions against USURY and not interest, but our Marxist inspiried ideologues of Islam-ism wish to market this rubbish as if it were Islam they were marketing

Could have been put in a more subtle fashion but ..i agree to the bold part
 
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