Banking on faith

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Sarika Malhotra: Jan 17 2010, 20:37 IST

It was meant to be a unique experiment. As India decided to dabble with its first Islamic bank, to be registered as a non-banking finance company (NBFC), backed by the Kerala State Industrial Development Corporation, “faith” was finally moving the mountain. In the pipeline were also the much sought Islamic bonds, “sukuks”. Kerala’s finance minister, Thomas Isaac, had acknowledged, “We need long-gestation funds to build airports, high-speed trains and expressways. Islamic finance promises unexplored potential in that context.” As a division bench of the Kerala High Court, in response to a petition filed by former Union minister Subramanian Swamy, stayed all further moves to set up an Islamic bank in the state, the context did take a U-turn on January 5.

Globally, Islamic banking is entering the financial mainstream even in Muslim-minority countries such as the US, UK and Germany. ABN AMRO, Barclays, HSBC, Deutsche Bank, Citi and Standard Chartered, are all vying to get a share in this $300-billion business, which has registered a 10-15% growth in the past 10 years.

KK Ali, CEO, Alternative Investments and Credits Limited, Cochin, reckons, “Islamic banking is growing faster in secular countries in Europe and America. In Malaysia, more than 40% of the investors and 60% borrowers in Islamic banks are non-Muslims. One-fifth customers of Islamic Bank of Britain are non-Muslims.”

Javed Ahmad Khan, Associate Professor, Centre For West Asian Studies, Jamia Millia Islamia, author of Islamic Banking in India, Scopes & Challenges, advises that Islamic banks have to learn

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Reader's Comments (5)| Post a Comment

Positive Approach

Asad | 19-Apr-2010Reply | Forward

When countries like USA, UK, and China etc are implementing Islamic Banking, why should India be far behind? Islamic Banking has a built in protection from the runaways and collapses which the world experienced/experiencing. Some of the excellent principles it adopts are fairness, justice, profit/loss sharing, integration of ethical and moral values, relationship with customers on investment grounds, reduces speculation, reduces devaluation of money, etc. We all have seen / seeing the ill-effects of interest. Why don%u2019t we try an alternative system which focuses on INTEREST of MANKIND?

Diiding India

Ash | 28-Jan-2010Reply | Forward

People in India should know that Sharia stands for strict Muslim law where all Indian women have to wear burka and get whip lashes if they travel outside their houses alone. Sharia belongs to dark ages, and would take away the freedom from all Indians for which they have already fought the Mughals and British. These Congress leaders want the Muslim laws to stop the women in their families to move about freely. Also such measures create a divide between Hindus and Muslims that helps Congress get more votes!

ISLAMIC FINANCE

syed ilyas basha | 21-Jan-2010Reply | Forward

We Indian fail to learn our experiences. We were late in catching the 'globalisation train', China and Asian tigers superseded us. We are in dilemma whether to allow 'Islamic Finance',even after 30 years of its inception in tiny states. Inspite of such a strong Regulatory administration, we lack confidence. Reservations in sufch matters should be abandoned forthwith. It carries the name of 'Islam' as it is based on the principle of replacing 'interest'with 'share in profit OR loss'. The early we take the plunge, the better. Better late than never.