Jobs @ MG
Profit and loss-sharing banking in India
|Islamic approach to economics is based
on equity, justice and fairness, remarked the veteran Islamic banker K.
Rahman Khan, M.P. while inaugurating the recent National Seminar on Profit
and Loss Sharing (PLS) Banking in India organized by Islamia College,
Vaniyambadi. Mr Rahman Khan appealed to Islamic economists to design and
create alternative financial instruments based on Mudaraba, Musharaka,
Ijara and Murabaha.
Dr FR Faridi asserted that rich nations of today are dealing in ‘usury’
of ancient times. Third world countries pay $1100 billion as interest
though their total borrowing is only $400 billion.
Analyzing the performance of PLS Banks in India. Dr Faridi stressed the
need for the establishment of PLS banks in the corporate sector. The main
hurdle in the establishment of PLS banks in India is the prevailing
banking regulating framework. Only when the pressure comes from the
community, the Government of India will amend the banking regulations
which will allow the establishment of PLS banks in the country. Tracing
the growth of PLS Banking Dr Tahir Beg of IIU, Malaysia, pointed out that
there are 177 PLS banks with assets worth $148 billion functioning in
several countries. India should take pride in being the birth place of
Islamic banking academically as well as institutionally.
Dr MY Khan, economic advisor, SEBI, suggested that IFIs should float
mutual funds in the present legal frame work. He opined that around 15
Islamic banks with meagre deposits of Rs. 750 million will not be able to
cater to the requirements of the country.
Classifying Islamic Financial Institutions in India into (a) Association
of persons (b) Islamic Financial Societies (c) Co-operative credit
societies (d) Islamic Finance and investment companies in the corporate
sector, Dr Bag Siraj, a well known researcher, presented case studies of 5
major interest-free credit societies, viz, Muslim Fund, Deoband, Muslim
Fund, Najeebabad, Toor Baitulmal, Hyderabad, Tamil Nadu Baitulmal, Chennai
and Islamic Welfare Society, Bhatkal Interest-free credit societies are
more successful than Islamic financial companies in terms of their output.
They have the potentiality to relieve the distress of the weaker sections
of the Muslim society. A notable feature of these institutions is that
women constitute more than half of the borrowers and depositors. The main
limitation of these societies is that their operating costs are very high.
Mergers and consolidations are the only way-out for cost effectiveness and
managerial effectiveness of these societies. Formation of a federation of
these societies is long over due.
Mr Majeed, GM of Al-Ameen Islamic Finance and Investment Ltd, stressed the
need for co-operation among the existing PLS companies in India. Need for
conducting a management development programme for the personnel of the PLS
companies is underlined.
When financial institutions in countries like England, Russia and
Luxemburg are opting for the Islamic system of finance, there should be a
concerted effort on the part of the Indian Muslims to pressurize the
Government of India in relaxing the relevant rules for starting PLS Banks
in India. Dr FR Faridi recalled the times when he and Dr Nejatullah
Siddiqui were branded as 'fanatics,' when they propounded the concept of
Islamic economics and banking. Gone are those days; there are several
universities and institutions offering masters and PhD programmes in
Islamic economics and bankings. IMF and Harvard University are studying
the growth of Islamic financial system. He exhorted the Muslim community
in India to rise to the occasion and venture into Islamic banking.
More than 300 delegates from various parts of the country participated in
this seminar which was held as a result of the efforts of Dr Mohammed
Ghalib Hussain of the Islamia College, Vaniyambadi. Two working groups
have been constituted to work out the modalities of the formation of the
federation of interest-free credit societies operating in South India and
to prepare a blue print for the establishment of an Islamic bank in India.
Share this page with your