Islamic banking: Many slips between the cup and the lips

Yousuf Ibnul Hasan : The writer is Columnist, Teacher, Trainer, Broadcaster, Contributor to Islamic Banking, Economics and Finance since 1981. He can be reached at: [email protected].

The local daily publish an article related to the Islamic Finance in which the writer has explained the role of State Bank of Pakistan. It was written by a seasoned banker who has devoted a major part of his professional life to the cause of promotion of Islamic Banking. Whereas the common opinion on Islamic Banking and the role of State Bank of Pakistan, is ineffectual, as the so-called Islamic Banking and Bankers have proven with the system as “many slips between the cup and the lips”. Sketching out a plan for the rectification of the system entails one to scrutinize the modalities of the prevalent system; one is required to question as to what is visualizing and understanding that Islamic Banking has become “too many actions, but no score” worldwide?
When the Islamic Financial movement started in 1958 from Egypt under the leadership of Dr Ahmed Al Najjar, it developed the Social Banking system in 1962 with the establishment of Mitgmir Saving Bank in the City of Mitgmir, Egypt. The Nasser Social Bank and Faysal Bank was named as MASSRAF as Islam does not have any witness in archives on the institutional way of money handling till Islam as “Deen”, a system for human life was completed. However, Prophet MuhammadSallallahu Alayhi Wassalam wasAmeen, Wise, Trader, and Honest and the concept of “Massraf” essentially revolves around these very qualities of Prophet Muhammad Sallallahu Alayhi Wassalam. Contrarily, at present, the bankers and banking community associated with Islamic Banking adhere to the conventional form and move like a “merry go round” with no directions and understanding to the cornerstone, base and basics of the concept and practice of Custodianship, Trading, Honesty and Wisdom in monetary affairs.
In forty years of my professional life in banking, as a banker as well as a trainer for Islamic Economics and Finance, I have disseminated my knowledge and experience to almost 150,000 students, around 17,000 professionals and 1000 religious’ scholars in Pakistan and the international world. Now reaching the age of 69, my mission is to spread the true spirit of the Islamic knowledge and experience related to Islamic Economics and Finance and to find the way banking should be operated and conducted under the principles of Islamic Economics and Finance from ordinary learners to professionals.
I started my journey in 1982 with the mission to bring the Islamic monetary system into practice by developing remedies for the present banking system with its all blessings as an ‘alternative’ to the ‘conventional system’. These endeavors have been acclaimed by finance and banking professionals across the continents through my writings, lectures and advocacy. My learnings and experiences in this subject range over more than four decades. It expounds that Islamic Monetary System -theory and practice -today needs ‘immediate and ultimate’ reconsiderations by correcting anomalies raised by Muslim and Non-Muslim professionals.
There is still an urgent need to be on familiar terms with the notions of Interest, Profit, and Riba, and to acquire a know-how of the banking practices that do not involve Riba. In this regard, the vital document, ‘Legal Documentation’, is to be prepared in order to provide ‘real soul’ with Shariah importance to replace the conventional deposits, lending and banking, so that it may offer clarity between conventional banking and Islamic interpretations on the factors of production, the man, money and commodity for banking.
It is observed that Central Banks and Commercial Banks operating in Muslim countries that internationally introduced the system are mere observers to the Islamic Banking System and these institutions are full of liquidity without a proper way of investment. It needs to be directed towards better relations between the Islamic and non-Islamic world in banking, financing, investment, and trade.
In addition, present Islamic financial instruments and products do not satisfy the growth of healthy savings, which may ultimately be converted into lucrative investments to bring out the results for socio-economic development and remain only confined to economic development, which is not the goal of Islamic Banking and Finance. The financial products are to be reformulated with incentives to change the economic conditions in (order to ensure) socio-economic development. The Islamic financial products are the urgent need of current Islamic banking practice, which needs to be supported by ‘innovative” products which may give prominence to the system and promote healthy investment opportunities among ordinary individuals, groups, and organizations, while simultaneously help to develop saving conduct that leads to investment in participation.
The international relationship between Muslim and non-Muslim countries through the highly developed ‘Information Base’ with workable financial products to develop investment opportunities within the countries and develop international trade relationships will curb inflation through Islamic financial and banking practice. Furthermore, banking institutions should be brought into a participating relationship with the state revenue requirements and should be made to play an influential role in helping the state develop a documented economy. Moreover, these institutions should be stressed to play their active part in the socio-economic development instead of self-development. Apart from that, protective measures should also be taken against such activities of the non-Islamic institutions and professionals, through which they are misguiding innocent investors by imparting incompatible awareness and training to execute Muslim wealth and by introducing their own Islamic products that are misdirected, defective and have multiple hidden contradictions.
The Islamic Banks can put the wealth in the right direction, and it can only be achieved if Central Banks have a clear concept of their targets towards Islamic Wealth Management. Islamic finance and banking can run parallel and in competition with the conventional system that allows the consumer to make choices. To create an awareness of the reality demands devotion, transparency and spirituality in working for ‘Riba’ free financial system and for eliminating “Interest” as a social evil. This will rebuke the prevailing “Islamic Banking System” which is thrust by vested interests. The world is actively looking forward to the blossoming and expansion of Riba-free banking and not the Islamic banking.
The role of State Bank of Pakistan and its governing team hasbeen seen as pathetic since 1979 and proven as that of a “Ping Pong” referee within the national banking system. In forty years as a monitor, the State Bank of Pakistan has failed to guide the bankers with regards to the reality behind “Rate” and “Ratio” in money matters. It has failed to demarcate and implement the difference between lending and financing. It does not accept the difference between Riba and Interest, and Interest and Profit, Sukuk and Debenture and economic and socioeconomics.
The Governor SBP, without any hesitation, exhibits an endorsement of Riba by announcing the increase and decrease of “interest rate” in the monetary policy. Moreover, the President, Prime Minister of Islamic Republic of Pakistan, as well as their ministers and advisors render no importance and emphasis to the Islamic directives and endorse the concept and the filth of “Riba and Interest”. On the other hand, it is the peak of carelessness on the part of Religious Scholars who remain tight-lipped and reticent over the matter and refrain from vocalizing their concern and guidance over the disobedience of Almighty Allah prevalent within the Islamic state.
Beyond any doubt, the Islamic Economic system offers solution to all the economic crises through its potent economic and financial framework. It guides the banker that learning the Islamic Economic guidance towards the financial system provides an operational system of banking that is based on trade with money for commodity and not money with money. Without such a framework, the banker cannot prove its system to be transparent nor can he accept its depositor as the financial source and as a partner to its banking institution.
One must understand the role of man as force, money as the source and commodity as need in Islamic economics and finance which develop the trading system in which the “volume of money is the value of the commodityand services”. Whereas within the present framework, money is taken in “value against value of commodity and services”.
Islamic financial journey can only be successful and would give the desired outcome if it is fundamentally promoted with training programs honestly instead of spending on conferences and seminars for self-importance and ego satisfaction. Bankers must be honest in dealing and developing the trade and trading techniques, and prove themselves to be Ameen for the trust that the Sarif bestowed upon the bankers.
The writer of concern article, and his intentions towards his professional efforts in the promotion of the Islamic way of Banking cannot be questioned, but I must share my experience as a student, trainer, teacher, banker, columnist and consultant, that an action cannot be deemed correct if the intentions are not fair. One cannot reach to Islamic Banking till the day of judgment, but if one looks into the Merchant Banking, a system which accept Men, money and commodity merely as factor of production, the success seems hardly to be the matter of a fleeting day in comparison to the system proposed and directed by Islam for every Muslim to follow as a Lifestyle and not to trade with Allah for Hell and Heaven.

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