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By MOHAMMAD SHOEB
DOHA: Some in the Islamic banking industry lamented that the difference between the Islamic banking and conventional banking is becoming thinner by the day.
Experts attending the ongoing 8th International Conference on Islamic Banking and Finance believe that the present Islamic banking system is no different from interest based banking.
“The Islamic banks are doing business the same way as the conventional banks and the only difference is that, proverbially speaking, the interest-based banks hold the nose straight, while their Islamic counterparts catch it by twisting the arm around their neck,” said Dr Sayyid Tahir.
Professor at International Islamic University, Malaysia, he told The Peninsula on the sidelines of the Islamic conference being held at the Qatar National Convention Center (QNCC) that the current form of Islamic banking system would in future face similar problems that the interest based banking system is facing today.
“The vocabulary used in the Islamic banking for various transactions is different and documentation is complex but in practice the difference between the two systems is becoming thinner,” he said.
There is growing concern that if the Islamic banking system is not “corrected” there could be an identity crisis sooner rather than later. People would begin questioning that if the conventional banking system is faulty then why Islamic banking is correct?
And if Islamic banking is correct then why conventional banking is wrong, argues Tahir.
Talking of ‘Shariah-compliant’ and ‘Shariah-based’ banking, he cited an example to make the difference clear and said when an Islamic bank accepts deposits on ‘Mudarbaha’ basis (partnership sharing basis) the money is shared between the depositor and the bank.
It is kind of joint money. So when the bank lends this money to a business entity it should be given in both the names— the bank as well as the depositor—which is usually not the case. Tahir stressed that banks should only act for and on behalf of the depositor and not lend solely in their own name.
The Islamic banking system started without any formal well-developed model based on the Shariah. It emerged as a response to the Muslim bankers and Shariah scholars according to the then prevailing situation.
The Islamic banking system, though, has great benefits not for only individuals but also for the economy as a whole provided it is conducted on the basis of Shariah that safeguards the interest of all the stakeholders.
“Islamic banking does not support speculative transactions. It is linked only to real transactions, so everything is in balance. It leads to less inflation, more employment and better distribution of wealth and resources among the people,” Tahir said.