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Resonate your identity with Naseeb journals. Express your opinions, share your thoughts, post your writings and connect with like minded people through the power of expression.
Islamic Banking: Where will it go?
Over the last five to ten years, Islamic Banking has become increasingly prevalent in the United Kingdom with a number of conventional high street banks now offering islamic financial services.
The thing that still bugs me though, is how Islamic are all of these services and products. I don't question the legality of any of them as people far more intelligent than I have approved them and I have a great deal of respect for the likes of Sh. Nizam Yaqubi and Justice Taqi Usmani.
What I do question though is whether we are headed in the right direction. If you take a look at any of the products currently on offer by any of the mainstream banks and analyse the cash flows involved one thing is always apparent. All of the products on offer mimick the cash flows of conventional products that are currently in use.
Now the thing about Islamic Finance and Economics is that it provides a fiscal and economic policy that is intended for the benefit of society as a whole. If however all we do is break down conventional contracts into bite size portions which we then restructure to be compliant with the Sharia'ah yet leave the cash flows (which at the end of the day is what is important) in the same state as they were with the original have we really achieved anything.
In many regards this phenomenon is perhaps not surprising, most market research shows that muslims don't actually want to learn the economics and risk structures behind using a new product. Far worse (from Islamic Banking as whole's perspective) is the fact that the vast majority of muslims are interested in using islamic financial services over and above regular financing (especially where borrowing is concerned) if and only if it offers them better value for money.
This leaves Islamic Banking as an industry in a bit of a quandry, the original intention 30 years ago at its emergence was to use this slightly more lax implementation we currently have as a starting point and build upon it. However with Islamic Finance still being a supply led phenomenon and customers only interested while costs/ returns are higher or comparable to those of conventional banking, are we ever going to get to a more complete implementation? Or perhaps we have it all wrong and the reason it is a supply led industry at the moment is because people are deterred by the fact that it does so resemble conventional banking.
The thing that still bugs me though, is how Islamic are all of these services and products. I don't question the legality of any of them as people far more intelligent than I have approved them and I have a great deal of respect for the likes of Sh. Nizam Yaqubi and Justice Taqi Usmani.
What I do question though is whether we are headed in the right direction. If you take a look at any of the products currently on offer by any of the mainstream banks and analyse the cash flows involved one thing is always apparent. All of the products on offer mimick the cash flows of conventional products that are currently in use.
Now the thing about Islamic Finance and Economics is that it provides a fiscal and economic policy that is intended for the benefit of society as a whole. If however all we do is break down conventional contracts into bite size portions which we then restructure to be compliant with the Sharia'ah yet leave the cash flows (which at the end of the day is what is important) in the same state as they were with the original have we really achieved anything.
In many regards this phenomenon is perhaps not surprising, most market research shows that muslims don't actually want to learn the economics and risk structures behind using a new product. Far worse (from Islamic Banking as whole's perspective) is the fact that the vast majority of muslims are interested in using islamic financial services over and above regular financing (especially where borrowing is concerned) if and only if it offers them better value for money.
This leaves Islamic Banking as an industry in a bit of a quandry, the original intention 30 years ago at its emergence was to use this slightly more lax implementation we currently have as a starting point and build upon it. However with Islamic Finance still being a supply led phenomenon and customers only interested while costs/ returns are higher or comparable to those of conventional banking, are we ever going to get to a more complete implementation? Or perhaps we have it all wrong and the reason it is a supply led industry at the moment is because people are deterred by the fact that it does so resemble conventional banking.
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