Are we ready for Islamic banking?

By Mansoor Durrani

In the beginning of 6th century AD, Arabian Peninsula was lying in the deep valleys of darkness. Attacking and robbing neighboring tribes was a norm; burying daughters alive was a tradition; capturing and sexually assaulting ‘other’s’ women was a proud act and unclothed worshipping was a sign of piety! In this highly polluted environment, the Creator of this universe began sending His guidance (once again) to the humanity through His Prophet. His name was Muhammad (peace and blessings of the Creator be upon him).  

After a few years of education, counseling and sacrifices by Muhammad and his team, the same murderers, the same beasts, the same robbers, and the same idolaters started behaving differently. The environment was unchanged; the geography was unaltered; the demography was no different; the sun still rose from the east and still set in the west! But the mindset had changed. The robbers became trustworthy, the murderers turned protectors, the beasts respected women more than ever before and the idolaters worshiped their Lord the way He deserves to be worshipped i.e. with respect and dignity.

In the beginning of 21st century AD, the whole world is again lying in the deep valleys of darkness! The Arab tribes have been replaced by the Wall Streets and the Dalal Streets (Bombay’s financial district). The financial whiiz kids sitting in the glass towers not only crunching numbers but also crushing the destiny of present and future generations. In the midst of financial gloom and economic hardships, a global ‘Islamic banking’ movement is launched. The original thinker of this movement is rightly called the ‘father’ of Islamic banking. His supporters can perhaps be called uncles of Islamic banking. And later on some aunts also joined the bandwagon. Fair enough. A vast majority of them are distressed at the economic and financial atrocities being committed by the present system. And they sincerely want to see an alternative system to emerge that is capable of distributing the wealth of this world equitably. But the 64 dollar question is: Is wishful thinking enough to replace a well-entrenched existing system with a new one? In my humble view; not really.

 Banking not for robbing: But what is wrong with these efforts? The answer perhaps lies in the short experience of Islamic banking the world has witnessed so far. Initially, when the concept of Islamic banking moved from the drawing board to the board rooms, buildings were constructed, furniture was purchased, and computer hardware and software were acquired to run the Islamic banks. This was absolutely fine. When the founders and subsequent sponsors of these Islamic institutions faced the question of staffing, they had to turn to Wall Streets and Dalal Streets. These bankers were raised for a different purpose i.e. rob, rob and rob; while this new phenomenon of Islamic banking needed a completely different breed of bankers. Islamic banks were expected to bring about the same (or similar) changes in the society that the religion of Islam brought in the early 6th century. The Islamic banks should have been staffed with Islamic bankers (managing third party funds as trust and investing only in assets adding value to the society as a whole and not just shareholders) and not just Muslim bankers. But no (or little) attention was paid or still being paid on this critical aspect of training and developing such a group of bankers.

Islamic banking has been around for over three decades now. This trillion dollar industry is being presented as a huge achievement by some uncles and aunts of Islamic banking. More and more Wall Street bankers are finding ‘career opportunities’ in this fastest growing sub-segment of the global financial sector. This is further polluting the already polluted waters of this ‘pure stream’.

Nothing much has changed on the ground. ‘Islamic funds’ are still being invested in capital markets ruled by heavy speculators. Retail ‘Islamic investors’ are still at the mercy of market volatility. Institutional investors are doing nothing more than parking their funds in ‘safe bets’ (real estate sector) without any economic value addition! Long-in-short, if trillion dollar industry with near global presence has not brought any economic/financial change, will two, five or ten trillion dollar of fund base and more countries embracing this ‘new’ way of banking do any good?

 Back to basics: The sincere uncles and aunts of Islamic banking must FIRST concentrate on basics. New institutions should be managed by new mindset. They must have a long-term plan to create a competent and qualified breed of ISLAMIC bankers. This requires a CONCERTED effort of spotting, grooming and nurturing talented and highly educated Muslim youth who have strong Islamic values. Are they ready for this very low profile but VERY high value (in the long run) role?

This article appeared in The Milli Gazette print issue of 16-31 January 2010 on page no. 18

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