Ever wondered whether Citibank touted itself as a Christian Bank or a Judaic Bank? Ever noticed any institution in India marketed itself as a Hindu Bank? The answer to these questions is an obvious "no".
Which will make you think, Why does a bank like Dubai Islamic call itself an Islamic Bank? Do we really need a superlative for the activities that the bank undertakes?
The answers to such intriguing questions is being sought by customers interested in knowing more about I-banking. Some of their interest has been induced by an overt marketing of the I-banking philosophy by the believers of religion. Much of it though, can be attributed to the myriad seminars, symposia, conferences, training programs, newswires, and product announcements carried out by practitioners and experts of Islamic banking.
But to a resident of the Bhai Phairu (without sounding condescending to the place) Islamic banking is something to do with.... Islam! Yes, but what exactly?
THE CONNOTATION:
The Islamic system of living encompasses the entire sample space of living. It is a comprehensive code of conduct that governs our dealings with Allah and His beings. It is therefore important to emphasise that Islam lays a strong foundation of moral uprightness, justice, and fairness in dealings. According to a notable Sharia' scholar, "There have been more books written by religious experts on Muamlaat (dealings) than on Ibadaat".
It means that our financial dealings are governed by an Islamic code of conduct which pre-requires honesty, fairness, and lack of exploitation. In this context, the word "Islamic" in Islamic banking & finance refers to a system of which is consistent with Sharia' (Islamic law)
THE PROHIBITION OF RIBA:
In the light of the Qur'an and Sunnah, there is an express prohibition on the collection and payment of interest (Riba). Islamic law also prohibits trading in financial risk or any transaction which includes the elements of uncertainty (Gharar). Additionally, Islamic law prohibits investing in businesses that are considered haram (such as businesses that sell alcohol or pork or pornography).
THE EVIDENCE:
There is ample evidence related to the express prohibition of Riba' in Quran and Hadith. We will insha-Allah delve further into the underpinnings of the boundaries that should not be transgressed in our financial deals in our later feature.
To give a very basic idea of the Islamic philosophy on financial transactions involving interest, it is important to emphasise that there are twelve verses dealing with Riba whereas the word Riba occurs eight times in the Holy Qur'an.
FOR THE SAKE OF BREVITY, ONLY A FEW VERSES ARE DICUSSED BELOW:
(SURAH AL-RUM, VERSE 39)
"That which you give as interest to increase the peoples' wealth does not increase with Allah; but that which you give in charity, seeking Allah's countenance, multiplies manifold" (30:39)
This verse categorically says that any increase in wealth as a result of Riba is bereft of Allah's blessings. The Qur'an contrasts it with charity, which has all the blessings of the Almighty.
(Surah al-Baqarah 278-9)
O believers. fear Allah, and give up what is still due to you from the interest, if you are true believers. (2:278)
These verses reiterate a few things. One, that Riba is categorically prohibited, in all shapes and sizes. Even a modicum of Riba is disallowed. This is a verse that forms the basis of the counter argument for those who say "only excessive interest or usury is disallowed, a little interest is allowed". Two, it is stated that Riba is unjust (zulm) and is destined to destruction (mahq). The worst effect of Riba mentioned in the above passage is that on human personality ie Riba demeans and diminishes individuals who indulge in taking it. Another significant point is that the claim of equating Riba with trade is also rejected (trade being mutually beneficial whereas the benefits of Riba may well be confined to one party only).
THE CAVEAT - ISLAMIC BANKING IS NOT JUST RIBA FREE BANKING:
Whilst the evidence against Riba' in the primary sources of Sharia' is overwhelming, it is very important to emphasise that Islamic banking is not only Riba free banking - it is a complete system of banking that embodies the essentials of transparency, honesty, fairness, and courtesy. An Islamic banker needs to be as service oriented, as courteous and efficient (if not more) than his conventional counterpart.
It is a fallacy on part of practitioners to keep emphasising the benefits of "riba free" without actually imbibing the pristine concepts of "ikhlaqiaat and muamlaat".
True Islamic banking will result not only from a specialised product offering approved by a Sharia' scholar. While that may sell the products in the short-run to those who value Riba free but Islamic banking and finance will succeed when the philosophy which underlines the way everyone should conduct transactions is followed in letter and spirit. The evidence against Riba' and unfairness can not be denied. But the next time you walk-in an Islamic bank I am sure you should expect more than just "riba free".