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The global march of Islamic
banking
By Phar Kim Beng
Next
month Birmingham, the home of one of the United
Kingdom's largest Muslim communities, will become the
headquarters of the Islamic Bank of Britain; in London,
there is already an Islamic stock brokerage. The spread
of Islamic banking and finance throughout the world may
not provide the exciting headlines that result from
extremist Islamist terrorism, but it is arguably of
farther-reaching importance - and enjoys the support of
the Koran itself.
Islamic banking operations now
exist in about 100 countries, with an estimated US$300
billion in assets, and are growing at 10-15% a year,
according to Gohar Bilal, a former visiting scholar at
the Islamic Legal Studies program of Harvard Law School.
Like any bank that complies with Islamic law,
the new bank in Birmingham will not pay or charge
interest on its transactions. Naturally, it will also
appeal for its business primarily to European Muslims,
who number nearly 2 million in Britain alone.
This is not to say that non-Muslim banks are
ignoring this market. For example, Hong Kong and
Shanghai Banking Corp (HSBC) in England already offers
pension and home-loan schemes and a stockbroking service
that comply with Islamic law (Sharia).
Still,
the introduction of Islamic banking in Europe is
tentative at the moment, meaning that it will at first
focus on high-net-worth customers so as to recoup
investments as soon as possible. In the long run,
however, given the growth of the Muslim community in
Europe, and the fact that non-Muslims will not be
excluded from these services, Islamic banking and
finance could turn out to be a useful bridge across
societal gaps.
The growth of Islamic banking
might seem remarkable in the context of the current
image of Islam as an atavistic religion of terror and
violence, a condition aggravated by the attacks of
September 11, 2001, when the world watched in horror the
acts perpetrated by the extremists. Indeed, Muslims
themselves have for decades ignored the advances in
Islamic banking, distracted by ideologues bent on
creating Sharia-compliant states.
Yet Islamic
banking is no less important than Islamic law at the
state level, as it was mentioned in the Koran in four
different revelations. According to Professor Muhammad
Ariff of the Malaysia Institute of Economic Research
(MIER): "The first revelation emphasizes that interest
deprives wealth of God's blessings. The second
revelation condemns it, placing interest in
juxtaposition with wrongful appropriation of property
belonging to others. The third revelation enjoins
Muslims to stay clear of interest for the sake of their
own welfare. The fourth revelation establishes a clear
distinction between interest and trade, urging Muslims
to take only the principal sum and to forgo even this
sum if the borrower is unable to repay. It is further
declared in the Koran that those who disregard the
prohibition of interest are at war with God and His
Prophet."
A pioneering effort led by Ahmad El
Najjar took the form of a savings bank based on
profit-sharing in the Egyptian town of Mit Ghamr in
1963. This experiment lasted until 1967, by which time
there were nine such banks in the country. These banks,
which neither charged nor paid interest, invested mostly
by engaging in trade and industry, directly or in
partnership with others, and shared the profits with
their depositors. Thus they functioned in essence as
saving-investment institutions rather than as commercial
banks. The Nasir Social Bank, established in Egypt in
1971, was declared an interest-free commercial bank,
although its charter made no reference to Islam or
Sharia.
Islamic banking has been adopted at the
national level in Pakistan, Sudan and Iran, and those
countries have decided to Islamize the whole of their
banking systems. In Malaysia, where progressive
Islamization is being carried out, total assets of the
Islamic banking industry rose by $3.5 billion or 20.8%
to $20.5 billion by the end of 2003.
Islamic
banking is not restricted to Islamic institutions
purely. In 1996 Citicorp set up CitiIslamic Investment
Bank in Bahrain. Following this precedent, financial
institutions ABN Amro, American Express, ANZ Grindlays
Bank, Chase Manhattan, Deutsche Bank, Nomura Securities
and Union Bank of Switzerland now all have in-house
Islamic units.
In the past, Islamic banking has
been held back by complacency - the tendency to sit back
and wait for Muslim investors to walk in the front door.
Recently, however, a number of institutions have
aggressively developed the market, including Dar Al-Mal
Al-Islami Trust, Islamic Development Bank, Al Rajhi
Banking and Investment Corp, Al Baraka Group and Kuwait
Finance House.
In predominantly Muslim
countries, the central bank has a Sharia board, whereby
panels of Islamic jurists seek to advise both the
central bank governors and private commercial banks on
what is legal and prohibited in Islam.
Yet
despite the monumental advances in Islamic banking, one
hardly hears any Islamic preachers, least of all
extremists, calling for more of them, or acknowledging
Islamic banking as a clear form of progress made in the
name of Islam. Rather, they insist that implementing
Islamic law and Islamic states constitute the two
platforms of building "true" Islam.
Such a
fixation is curious, if not pernicious. After all, while
the Prophet Mohammed, whom all Islamic extremists insist
Muslims must emulate, was a great law giver and
statesman, facts that history does not dispute, he was
also a merchant. In fact, prior to becoming the Prophet
of Islam, he was known as an affable, able and honest
trader by all the Arab tribes - two qualities that
attracted Khadijah, a businesswoman of prominent
standing, to make a marriage proposal to the Mohammed,
to which he accepted.
In pursuing a form of
puritanical Islam, Islamic extremists have sadly
politicized the corporate memory and culture of Islam.
They have also reduced the repertoire to which Islam
could appeal to further its revival, such as through
innovations in Islamic banking and finance.
(Copyright 2004 Asia Times Online Ltd. All
rights reserved. Please contact content@atimes.com for
information on our sales and syndication policies.)
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