A
while back I was invited to a dinner party at one of my friend’s place in
Karachi. That was one of my cheerful days as my whole gang, my buddies were
there at that lunch-cum-dinner party. Whenever we all are together , “one” has
to be the centre of attention but mind it being such centre of attention
means quite a game of nerves and patience because all of us just pull leg of
that centre of attention one way or other . I was that lucky centre of
attention that day because of my very recent inclination and interest on
Islamic banking.
All
my friends present at dining table were one way or other linked with financial
sector and I’m quite proud of their competencies, professional excellence and rationality.
Though I knew that all of them were not convinced with Islamic banking, however
their discussion /criticism that day was surprising and an eye opener for me. Questions
like Islamic Banking is just
a new way of these Mulanas to mix religion with everything to have their
mass popularity, that Islamic Banking is a new way of exploitation by Mulas and
that Islamic
Banking doesn’t even fulfill the definition of banking. I realized that if
people educated, exposed and reasonably faith sensitive (most of them) were
criticizing IB then how masses would perceive this new banking system?
I
tried to clarify queries of my friends with my limited knowledge that like
other economic and financial system, Islamic Economics/banking is a system that
has got its unique characteristic and can be considerably different from all
other prevailing systems. So even definition of banking can vary among
different economic systems. I agreed then and still admit now that there are
many problems and issues in practical implementation of this new financial
system, but one would easily agree and accept the practicality, soundness and
stability of the system if one thinks rationally and logically.
I
sometimes fail to understand that why people forget the usual process of evolution
and transformation to better systems when the older ones faced problems
resulting into severe negative consequences. Even for economic systems, the
world has seen various systems over different time periods, while improvements
were made in each one of them following a crisis, the inherent weaknesses of
these structures made them vulnerable during adverse economic conditions.
Capitalism and Socialism have remained the two most prominent economic systems;
we have seen them being implemented with various modifications however they
have not been able to address basic economic evils resulting in often occurring
financial crisis
The
significant variation in basic
features of Islamic finance from its conventional counterparts depicts it as more
sound and viable.
Prohibition of Riba, Risk sharing, Asset Backing and Avoidance of Speculation
of Islamic financial system ensure the positive impact of Islamic economic
system. To make it more explicit I would like to mention some key
distinguishing features between Islamic banking and Conventional banking
- Conventional banking prices money while Islamic banking prices goods and services implying that Islamic banking supports real economic activity leading to overall economic well-being of the society by redistribution of wealth
- Conventional banking is based on fixed returns while profit sharing is an essential element of Islamic banking for both asset and liability side of balance sheet
- Conventional banking works on the principle of risk transferring as it does not involve itself in trade and business while all participants of Islamic banking participate in trade and business and therefore all share the risk.
- More stringent requirement of disclosure in Islamic banking as compared to Conventional banking make them less prone to financial fraud and crime.
However,
still, Islamic Economic System is not as appealing as it should be even after
multiple crisis of conventional system. One bitter realization that I had over
that lunch discussion regarding the low acceptability of Islamic banking among
masses is its “name”. A big majority including my “religiously” enlightened
friends would have accepted this system wholeheartedly if there would have been
a name other than Islamic banking. Replacement of this name of Islamic banking by
any other name could have earned much greater acknowledgment and acceptability
for the system.
So,
It’s not only about Non-Muslim world, it’s a MINDSET which is not ready to
accept this system. That mind set is the biggest challenge, a great impediment
towards the growth of this industry.
I
am absolutely not a religious person; rather my friends make fun of me
indicating the conflict between my appearance and my inclination towards
Islamic banking. My faith sensitivity has not driven me towards this system; I
accidently got the opportunity to work for Islamic banking. Trust me the more I
read and the more I get the comprehension of the subject I get more convinced
with the sustainability of this system.
My growing interest in this new banking system
and my recent debate on these issues have made me initiate this blog
which will have discussion and explanations on Islamic banking and for some
time I will be posting about different aspects of Islamic banking. However, my
blog is not just about changing the mindset with regards to Islamic banking but
will encompass my personal experiences related to any area worth sharing.
