It does not require an extraordinary intellect and insight into banking concepts rather a mere common sense to discriminate between real long-term welfare and short-term outputs to the economy through an application of a well-established system of Riba less banking. Dr Ahmed Al Naggar from Egypt is the pioneering proponent of the banking system, standing on the foundation of social priorities instead of essential economic and monetary operation in institutionalised financial services. He gave the concrete shape to this concept by laying the understructure in the form of “Mitgmir Saving Bank” in 1962 in the Egyptian city of Mitgmir. Perhaps this was the first commercial banking institution time-honoured to provide Riba-less banking services to the people.
The bank was not titled “Islamic” but termed “Saving Bank”. The first significant idea was to provide safe saving at an appropriate investment through participation between the bank and the depositor; furthermore, to propose financial services with participated inputs and outputs considering the “Modaraba” concept as the base banking system.
Dr Naggar considered Riba (income or benefit earned or taken through wrong intentions, means, methods, participation or acts)as the culprit damaging the economics of the world and an utter combination of evil and sins. He advocated the complete elimination of Riba as the only guard of an economic system. His banking concept supported giving priorities to socioeconomic instead of only economic factors for the development and growth of humanity. It is only through his vision that today Islamic economics and finance is flourishing as the world’s fastest-growing system with a challenge to the conventional monetary world.
Being a graduate of Islamic Banking and Islamic Economics (1983) from the International Institute of Islamic Banking and Islamic Economics (Egypt & Turkey), I am a fortunate disciple and trooper of Dr Naggar’s workforce. He prepared for future challenges against Riba and Interest. The system demands the acceptance of the vital principle which recognises humans as the force behind all economic activities instead of treating the money, which works only as a capital until it gets a purpose and support for exchange against commodity or services through the efforts of men. It was his opinion which he transformed into the minds of his students that resources are unlimited against human actions, which remains limited during the lifetime of an ordinary man.
Between 1960 to 1985, Islamic economics was in the developing stage against the strong opposition. Not only the non-Muslims but even the Muslim banking professionals, economists, jurists, and traders considered the wave of Islamic banking as the jugglery of a confused group. But the archives proved that the movement for Riba free monetary system kept on accelerating in the economic market. On the conventional front, the bankers devalued the financial and banking activity, and finally, Dr Naggar and his team were arrested by the president of the time Jamal Abdul Nasir of Egypt. The reason was only doubts created by the conventional market accusing the movement as support to Aqawam-e-Muslimin (Islamic Revolutionary Movement) against the regime of the president. Dr Naggar prisoned in solitary confinement at Cairo prison, where he spent two years in rigorous imprisonment.
During his arrest, one of his colleagues of the financial movement and citizen of Pakistan was released and deported back to Pakistan. He established the Interest-Free Cooperative Bank (IFCB) in Karachi, the commercial hub of Pakistan, in 1965. The bank was located at Saddar Cooperative Market, City Center in Karachi. This bank operated till 1974 and then was merged with conventional bank institutions due to the nationalisation of Pakistan commercial banking sector. This was the second setback to the Islamic financial movement.
The banking professionals, economists, and scholars from the new generation who are receiving fruits from the harvest of their ancestors are yet to overcome shortfalls in the understating of the basic concepts that Islam supports for the magnificent economic system. So much so the leading banking professionals avoid discussing the topic that leads to a transparent monetary. An ordinary Islamic banker fails to understand the differences between Interest, profit and Riba, Conventional Economic and Islamic Economics, Finance and Lending, Banking and trading or the concept of Human Capital. It is a common understanding of the factors of production, which are land, labour, and capital, where rationally Man, Money, Commodity, and Services are the fundamental factors of production that define the clockwise application of the transaction. They are still unaware of the profitability formula and consider Interest the only application for profitability, using rate instead of the ratio.
At the closing session of the workshop at IIIB&IE in 1983 in Turkish Federated State of Kibris, addressing Egyptian Army Officers and Sudan Parliamentary Group, Dr Naggar criticised the attitude of Muslim bankers serving conventional banks of the time. He insisted on realising the filth of Riba in banking. He propelled highlighting the horrible after-effects of lack of awareness about Riba and confirmed the doom of the system in case of the absence of practical efforts. According to him, Islamic Banking would only be seen either in conferences, seminars or in the control of those who want Islamic Banking in their way, no matter it is Riba or La-Riba, thus resulting in the massive loss as the self-fabricated and self-centred cannot develop awareness among masses. In 2018it is proven that the Islamic financial movement that started in 1960 is still moving in marry-go-round in the form of conferences, seminars, workshops, research papers and training sessions by those who still need to be polishing with the basics of the system.
Unfortunately, even today, with all the support and participation of conventional and Islamic experts, scholars and professionals active in promoting Islamic Finance are unable to bring the banking and finance to acknowledge the importance of the human element in economics. They still do not know money’s fundamental role, which only acts in volume against the value of commodity and services as the medium of exchange, and they do not accept that volume of money is the value of commodity and services. Still, the application uses a fixed rate for fixed tenure on principle, declaring it as the profit instead of Interest.
The religious groups responsible for a task to monitor the transactions executed under Sharia compliances are themselves unaware of the importance of “Ratio” in finding the profit on the application of principle amount used for specific purpose and period on behalf of the owner of funds.
The Central Banks of Islamic Countries are, as usual, declaring the interbank rates as “Interest Rate” instead of calling it “Profit Ratio” and yet unable to find a mechanism that develops financing in the participation contrary to the lending. To the extent that in an international conference, a member of the leading Islamic bank was quoting Modaraba, Musharka, Morabaha and Ijarah as loan base transactions and Sukuk as Islamic Bond.
The Islamic Bankers verbally declare the banking as “Islamic”, and in reality, their banks are working as the money shop where one can buy and sell the money. The observations about the working of the Islamic Banks show the outcomes as practising of lending money for the transaction which is harmful to the human life and humanity.
Some of the significant evidence of the purity of Islamic banking and finance are:
= The Islamic bank does not bother to promote the media publication and programs that deliver vulgarity, abusive matters, accusations, and blackmailing attitudes through words to the human readers and viewers.
= The financing to the airlines selling liquor at the in-flight sale is not justified irrespective of the high cash turnover business.
= Ijarah financing is still workout on the amortisation instead of the affordability level of the gross monthly income of users of the asset under Ijarah.
= That the Morabaha(trade-related financing) application is on double agreement and funds are disbursed against mortgage, lien or creating charge by fixing the sale and purchase price of the product before the transaction is documented into a pre-decided agreement, and in most cases, banks are exploiting the need of its participator.
= The massive advertisement by the Islamic banks in displaying their banking system as “Interest-Free”. Instead, they should accept the reality that Riba is prohibited, and there is a never-ending difference between Riba and Interest.
All the illness that prevails in the Islamic financial and banking market needs an effective remedy to overcome the shortfalls and weaknesses contaminating the magnificent system which has the solution to all economic crises, and it was executed, tested and proved with the three primary sources which need not be ignored and taken as the guiding rules. The Holy Quran has shared all the methods, which are further explained in the form of Hadith in several ways and through several scholars and jurists about the practical application of the Sunnah of Prophet Muhammad Sall-La-Ho-Alayah-e-Wassalam.
Several types of research have been conducted, and numerous books have been written by many scholars, explaining the financial system, with the ignorance of the priorities that set the transaction right or wrong. It is a matter of great concern that intentions have to be judged for the correct action. The correction to such intentions can only be possible if basics of the Islamic economic system has to be taken as the foundation, Islamic Finance as the application and organised Islamic Banking services to the business, commercial and monetary transaction for the better humanity by the human being who is unique among all the creations. It must be clear that there are three types of Riba explained in the code of conduct; the Holy Quran reflects the factor of production in the Islamic Economic system. These types are titled Riba Al Nassiah cover the Money, Riba Al Fadal, which explains the role of commodity and Riba Al Garrar guides the men how to act while dealing a commercial transaction. The major three types of Riba lead to almost sixty sub-categories of Riba through which the economic problems can be smoothly resolved wherever uncertainty arises. It explains how to maintain financial stability. This advocate gives priority to economic activities for the transaction.
Prophet Muhammad Sall-La-Ho-Alayah-e-Wassalam was Ameen, He Sall-La-Ho-Alayah-e-Wassalam was given wisdom, His,Sall-La-Ho-Alayah-e-Wassalam profession was a trader and He Sall-La-Ho-Alayah-e-Wassalam was honest in his dealing. Banking is a spiritual and honourable commercial practice organised and in decent participation between man and commodities and services, keeping the money as the bridge, two ends of the transaction. It demands involvement, risk sharing, a high level of ethics and morality, wisdom in decision-making, and humility in serving. Thus, Islamic banker serves as Ameen, Astute, Trader and Honest, which were the qualities of Prophet Muhammad Sall-La-Ho-Alayah-e-Wassalam. By adopting such abilities in their profession, banker can lead to the solution of economic crises, better understandings to the saving conduct, rational approach to investment through participation that ultimately develop strong liquidity with effective investment, which encourages commercial, business and industrial growth, resulting in employment growth which decreases the crime rate in the society.
The banking and banker qualities explained above justify that the banking system cannot be unwanted or Haram as banking is the only way to discourage the greedy accumulation of wealth and encourage saving conduct. The accurate banking system is an organised cycle of activities reinforcing micro and macro development and prosperity. It brings individual growth through embracing socioeconomics. The faults in banking services are due to the bankers’ greed and not the banking system, and this greed can only be eradicated by following the first principle of Islamic economics, which is, “The action are judge by the intentions “.