Tuesday, February 17, 2015

Refocussing the Valid Criticism on Islamic Banking

Refocussing the Valid Criticism on Islamic Banking

There has been a lot of criticisms on Islamic banking but it has to be addressed correctly.

Criticisms of Islamic banking includes it being too expensive and just a mirror image of conventional banking.

To get credibility of the criticisms we must address the Shariah issues of Islamic banking whether Islamic banking in practise contradicts Shariah.

We cannot say Islamic banking is wrong because it is too expensive. It is a makruf (known) principle in Shariah not to interfere in normal market pricing. If that is our line of criticism we have to prove the point with statistics and be sure we are comparing like with like. For example are we comparing fixed rate Islamic finance with floating rate conventional finance? In which case is our conclusion conclusively proven with numbers to support?
We must also be cognisant that Islamic banking is not meant to operate in a dual environment and in a real Islamic economy it is haram for Muslims to frequent conventional banks. In today’s economy Muslims are allowed to also use conventional banks and conventional banks do not have to abide rules Islamic banks have to. This means Islamic banks by default have to be “like” conventional banks to survive and thrive.
In this case it is not appropriate to level criticism only at Islamic banks; the bigger criticism have to be levelled at the government for allowing conventional banks to continue operating at a distinct advantage over Islamic banks. Governments have also failed in their duty to prevent the Muslim ummah from using riba institutions.