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Islamic banking from the eyes of a Learned Scholar.
A comprehensive story. 📚
A comprehensive story. 📚
Year 1957, nations and communities have begun rebuilding after the world war that lead to severe food shortages, hunger, famine, loss of lives on an unprecedented level before.
The colonial powers slowly started retreating, leaving the Muslim majority nations to govern in sovereignty.
They left, leaving behind their legacy, the economic and financial system centered around commercial banks and fiat currency.
They left, leaving behind their legacy, the economic and financial system centered around commercial banks and fiat currency.
The scholar is troubled. He has been bombarded with questions and clarifications from the masses regarding the banking system.
The banks clearly run on Debtor/creditor relationship reaping extra benefits from lending money out.
The banks clearly run on Debtor/creditor relationship reaping extra benefits from lending money out.
This,without a doubt, goes against the fundamentals of the native faith.
It can never be permissible. It is clear Riba.
It can never be permissible. It is clear Riba.
The masses have just begun to rebuild their lives and they need cash for it.
The non Muslims in their community have rebuilt their homes from loans taken from these banks. Others bought homes.
For far too long the scholar had said, NO! to it.
The masses are frustrated.
The non Muslims in their community have rebuilt their homes from loans taken from these banks. Others bought homes.
For far too long the scholar had said, NO! to it.
The masses are frustrated.
Some resorted to the principle of necessity and ventured into Riba banking.
After all, as the legal principle states clearly;
"Necessitas facit lictum quod alias non est lictum".
Necessity makes lawful which otherwise is unlawful.
After all, as the legal principle states clearly;
"Necessitas facit lictum quod alias non est lictum".
Necessity makes lawful which otherwise is unlawful.
An alternative is required. For sure.
How though?
What is required was a revolution.
"Replace the whole banking and financial sector".
The banks have seeped into all sectors of the economy.
To uproot it would lead to crashes and disrupt the economy to potential chaos.
How though?
What is required was a revolution.
"Replace the whole banking and financial sector".
The banks have seeped into all sectors of the economy.
To uproot it would lead to crashes and disrupt the economy to potential chaos.
This could single handedly be the greatest challenge the scholar has faced in recent times.
The masses just survived world war. They might not survive another revolution that would destroy livelihoods as they saw it.
The masses just survived world war. They might not survive another revolution that would destroy livelihoods as they saw it.
So in place of the conventional banks, another building needs to be placed. An Islamic bank, built on core principles of;
1. Risk sharing.
2. Communal welfare and;
3. Economic prosperity for all.
These "Islamic Banks" are supposed to take over the existing financial system.
1. Risk sharing.
2. Communal welfare and;
3. Economic prosperity for all.
These "Islamic Banks" are supposed to take over the existing financial system.
In time, the scholar hoped that Muslims will slowly subscribe to this bank's services and lack of demand for conventional products will end those banks going bankrupt.
It was a revolutionary idea. One that would transform the financial system as we know it.
It was a revolutionary idea. One that would transform the financial system as we know it.
With sound principles of Sharia, jurisprudential aspects tested and proven to provide results from the golden era of Islam, it was only a matter of time before the Muslims establish themselves as economic super powers on earth.
"A force to reckon with". He thought.
"A force to reckon with". He thought.
The scholar knew that the current system was the reason which widens the gap between the rich and poor.
The very idea of uplifting the standard of living and reaching economic prosperity for all was put at the core of this Islamic banking system to counter this particular fact.
The very idea of uplifting the standard of living and reaching economic prosperity for all was put at the core of this Islamic banking system to counter this particular fact.
The day arrives.
Voila! Just like that. The bank began it's operation.
People were skeptical at first.
Investors were reluctant on risk sharing aspect.
Customers questioned the process. They did not understand it.
Voila! Just like that. The bank began it's operation.
People were skeptical at first.
Investors were reluctant on risk sharing aspect.
Customers questioned the process. They did not understand it.
This became the first challenge the scholar had to overcome. The initial start, The take off is always the hardest.
Therefore under the guise of necessity, he approved to copy the success of Conventional banks and Mirror it until Muslims are able to trust Islamic banking model.
Therefore under the guise of necessity, he approved to copy the success of Conventional banks and Mirror it until Muslims are able to trust Islamic banking model.
No sooner that the products were remodelled, people found it easier to relate to.
And the bank found it easier to operate in terms of management, investment and growth.
The quasi guarantee of profits with risk mitigation measures rendered its products to stand on its own.
And the bank found it easier to operate in terms of management, investment and growth.
The quasi guarantee of profits with risk mitigation measures rendered its products to stand on its own.
The scholar oversees the operations with a smile on his face.
He is confident that Islamic banks now at "infancy" will grow up and stop the mirroring of products and resort to the original Core Principles of communal welfare for all.
He is confident that Islamic banks now at "infancy" will grow up and stop the mirroring of products and resort to the original Core Principles of communal welfare for all.
Oddly satisfied with his work, after years of research and sacrifice towards establishment of an Islamic bank, he passes his duties and responsibilities to the next generation scholar and retired.
Slowly, Islamic banks gained momentum. More and more people got caught up in the appeal of the term "Islamic". It's assets rose from millions
... to billions
... to trillions.
... to billions
... to trillions.
Fast forward to year 2022. Oddly enough, Islamic banks are still stuck at infancy stage no matter it's assets rose by the trillions.
Where the scholar gave his approval as a necessity to mirror the success of Conventional banks became the core principles it is run on. The norm.
Where the scholar gave his approval as a necessity to mirror the success of Conventional banks became the core principles it is run on. The norm.
Why are Islamic banks are stuck at infancy stage? Or are they?
Have they been operating in never land?
They have become too comfortable doing what they have always done that they completely neglected the fundamental principles it was originally established for.
Have they been operating in never land?
They have become too comfortable doing what they have always done that they completely neglected the fundamental principles it was originally established for.
Today, instead of uplifting the lives of all Muslims, its practices further deepens and widens the gap between the rich and the poor.
The first generational scholar would be very disappointed at the current trends of where the banks were heading.
The first generational scholar would be very disappointed at the current trends of where the banks were heading.
What changed though? What were the challenges and difficulties faced during the management that lead to the banks back to square one?
Stay tuned for third installment, where we discuss;
Islamic Banking from the eyes of the Banking Executive. The Manager.
Stay tuned for third installment, where we discuss;
Islamic Banking from the eyes of the Banking Executive. The Manager.
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