The journey was started to accomplish Shariah compliant prudent banking opportunities. The concept was to provide Halal Banking and safety from Riba (Interest). The will was to avoid foreign banks and their banking system in Muslims countries. The vision was to establish Islamic Economic System.

After passing an initial life of its working today in 2010 people have questions in their mind that Is Islamic Banking really Islamic? The matter derives from two aspects. First – what is the difference in methodology a common man can see while he deals with Islamic Bank in comparison to conventional commercial bank? Second – weather Interest is completely weeded out even at the benchmarking level from Islamic Banking System?

The problem arises when Islamic Banking System is considered as merely a change of name. People try to figure out what if we say Ijarah to Lease? Is it a same product that a conventional financial institution can offer? If we sees it closely so Ijarah Muntahiya Bitamleek (Islamic Leasing Product) is very similar to the finance lease provided by conventional financial institution except the difference of Insurance cost (Takaful / Islamic Insurance) which has to be borne by lessee in Islamic mode and it is built in the rentals. But again it is not enough to say something goes wrong. Here I just want to indicate that people always try to compare Islamic banking product with conventional financial institution’s one. But it goes critical when it has some fixed return embedded.

Regardless of a fact that many of Islamic Banking products have some embedded component of fixed return there is another issue that is still a biggest objection of current Islamic banking system. This is the issue of using Interest rates as a benchmark. Being Investment Banking professional of an Islamic bank in 2006 I prepared many term sheets based on KIBOR for benchmarking Diminishing Musharika profits. It made me feel that we are just working under the same capitalist system by giving a name of satisfaction i.e. Islamic. A person can say that if the price of beef is being benchmarked by pork so we can not say beef prohibited just because of pricing mechanism but there are two points here first is the development of Islamic benchmarks and second the tentative nature of rates that are not a benchmark within but a mere estimate assigned by relevant probabilities or there is a will of having something fix part and making the rest performance based.

There is another argument on Islamic Banks and it is regarding their transactions with commercial banks. In addition the way commercial banks are having Islamic banking branches. It raises the issue of credibility that whether it is the same money or not? Sometimes it is also odd that what the will of seller of banking product is. At one place a bank in Muslim Country is selling Conventional Banking Product and on other hand they have Islamic Banking Products. It is same that if Hamdard shall announce to sell wine with their parallel sale of Roh Afza. The point has to be addressed by Islamic Banks and regulators.

In my view all above mentioned apprehensions are minor. The big point is different. The real important point is we can not accomplish truest Islamic Banking System without having a true Islamic Economy and we can not accomplish Islamic Economy without surrendering our Non-Islamic lifestyles and societies.

I don’t know why we are more interested in names. No one can sell Halal Wine; simply we can not make wine Shariah compliant. The same way we can not find a way to Halal the interest. An interest free banking system is correlated to the will of economy to invest in risk. People just can not derive Islamic Banking with a will to have fix income securities in their portfolio with tagging of “Islamic”. It is actually risk that we fix rather than return in fix income product. If the concept is risk sharing so we have to work far too long to aware our societies in this regard.

I never say that we have to discourage Islamic Banks. We just need to learn and implement faster. The more we are emphasizing on Islamization of Islamic banking, the more we have to work for Islamic economy and the more we want Islamic economy, the more we have to be good Muslims in all aspects of our society otherwise it is all a debate that can not end. Don’t find Islam in Islamic Banking. Implement Islam on youself then your economy to banking shall automatically be Islamic.

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bibi maryam Says: in banks either it is Islamic or conventional run on interest during my internship i came to know how banks earn their income other then their customers.it is totally on interest whatever banking system is? 02 - August - 2010 03:59:27 PM sam shah Says: renaming a bitmap image to jpeg works on some windows, but it never alters or reduces the images pixels, so lets not rename interest a gift because it will make no difference 25 - January - 2012 06:25:35 AM
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