By Mubashir Hassan
Worldwide interest is developing in Islamic Banking and more such banks are being established even in countries where Muslims live as minorities for the reason of their being more resilient to Economic meltdown. This type of banking is also considered as ethical in comparison to exploitative conventional (riba based) banks which have lead to large scale disparities in wealth. Some conventional banks too are establishing Islamic windows for conducting Sha’ri’ah compliant business separate from their conventional business.
However, a question is being asked from many quarters whether these banks are really conducting their business on Sha’ri’ah principles or this is just name change. Some of our scholars opine that real Islamic Banking does not exist in the present world, just as there can’t be an Islamic wine shop so there can’t be an Islamic Bank. Islam not only prohibits riba but also prohibits gambling, speculations and investing in Haraam activities, these all have to be taken into account. Murabaḥah (cost plus) is particularly under attack and it is the instrument which is presently most common in comparison to other instruments of Islamic banking. Mudharabah (Profit sharing) and Musharakah (Joint venture) are not much in vogue, owing to social set up and values. These ventures are more feasible at the community level for micro-financing small scale and cottage industries. Another vehement type of criticism comes from those who have vested interests in present riba based economy, whose businesses thrive on this exploitative economic system. Obviously they might be using the services of expert economists to put forth their agenda and propagate it.
There are people who have taken extreme positions on the subject. While some regard it as Haraam as a conventional bank and others think that it is completely Sha’ri’ah compliant and some ultra-modernists regard the conventional banking as permissible. These are extreme views and it is lack of understanding of the mechanism and operation of these banks which makes one to regard both as similar.
It can’t be denied that no form of “Islamic Banking” is at present completely based on Sha’ri’ah Principles. Some forms of aversion are based on genuine points. Theoretically there is compliance with Sha’ri’ah, but in practice there are some deviances. There are problems in the field to implement all the ideals. The trouble arises when these banks have to deal with conventional banks – they deposit extra liquidity or borrow from these banks when they are in need – which involves Riba.
Completely Sha’ri’ah based banking is only possible when whole of the Economy is Sha’ri’ah based. The transactions occurring within an Economy, which is not fully Sha’ri’ah based, can’t meet all the basic criterion of the Sha’ri’ah. Presently whole of the world economy is integrated and on top is the IMF and world bank, which are there to safeguard and promote the interests of the capitalists. It is unthinkable that these banks shall not be affected by the policies of these bodies when even the sovereign nations are not free from their influence. The economic policies of a sovereign state are affected by these world bodies.
Anyway if these Banks are not performing completely as per Sha’ri’ah, so why should not they be closed down? Why should people invest/deposit in them having illusions of their permissibility? This however is not the whole truth. Despite shortcomings, these banks perform important tasks. We can’t say that these banks are fully Islamic, but it has to be admitted that these banks are not same as the conventional riba based Banks. It is an option available to us, an alternative. In future this type of banking is going to be more refined and the element of the objectionable and doubtful transactions can be and are slowly minimised and in phases can be eliminated completely. If there is no start, how can there be any progress. The principles of democracy, liberalism and socialism first started just as ideas and theories but slowly were put into practice.
These banks or the Islamic windows are headed by Sha’ri’ah board, which consists of ulema who are well aware of these transactions. They have to take care to ensure that the business doesn’t foray into the domain of impermissible. Notwithstanding all this, the present instruments of Islamic banking have been devised by the jurists of repute and they regard them as permissible. Anyway, it would provide an alternative to the existing conventional banking which is exclusively interest based. Otherwise a person would have no choice but to get his saved money deposited in a conventional bank. Even if he does not take interest, still his money is used for the purpose of riba based transactions. On the contrary he has to take loans from a conventional bank in case he is in need.
Islam does not advocate concentration of wealth in a few hands, but wants it to be put into circulation so that inequalities end and the benefits of wealth percolate to lower rungs of the social ladder. In today’s world every person who has surplus wealth is not in a position to put the same in business. This role has to be played by banks: to collect the surplus capital and to use it where it can be utilized – to put the money in circulation.
Here I would like to add a precautionary note, that all those claiming to be based on Islamic principles are not really so. There are some companies which, in the name of Islamic banking, do fraudulent deeds and their aim is nothing but to attract investments in the name of Islamic Banking. One has to be cautious here and not believe everyone who claims to be doing such businesses. One should also be careful about as to who is on the Sha’ri’ah board of that bank. It is not easy to understand the working of these banks and to discern whether or not a particular product has some prohibited element in it or not. For that purpose we have to rely on ulema to guide us in these matters.
We should not discourage Islamic banks, even if they do not fully serve our purpose. We have to learn new ways and techniques to Islamise the process of banking and in phased manner weed out undesired elements. The Islamic banking and finance would only blossom in a society which has imbibed Islamic values: where there is no greed, no selfishness and no extravagance. People live simple, unassuming and unpretentious lives. Above all people have an eagerness to help each other and not to thrive on others’ compulsions and helplessness. Not only this at individual levels we have to change our lifestyles and make it Islamic. We can’t, on one hand be extravagant and waste, and on the other hand go to an Islamic banks for loan.
Islamic banks are in their infancy, they need some time to get refined. In the current set up, we should avoid banks as far as possible, but when it is unavoidable is it not better to opt for Islamic banks which, even though have elements of impermissibility, still are not outright riba based. One has to understand the process to some extent before dealing with these types of banks and deal in such transactions which are not doubtful. It is incumbent upon those who have specialised knowledge to disseminate it and to show us as to how we shall deal with our economic problems.