Islamic banking, which used to be a myth in this part of the world several years ago, is not only in vogue but is gaining rapid popularity theses days. Not only a number of foreign and local banks are doing a roaring business in Islamic banking but even the conventional banks have been tempted to open special Islamic banking counters.
In fact, it was Dubai Islamic Bank, which took the lead as early as 1975. Thereafter, Islamic banking grew into a world-wide industry exceeding a huge figure of $900 billion.
Almost all the banks engaged in Islamic banking are working under the umbrella of "Shariah Board" or "Shariah Committee" consisting of a panel of renowned religious scholars who are the guiding stars. A few of these banks have a single Shariah Consultant or Shariah Advisor.
These Shariah Scholars or Shariah Advisors are engaged against a fee for their expertise. According to a rough estimate, the number of most outstanding ones is about 12, which is very meagre as compared to their demand in the market. It is due to paucity of their number that they are serving on different Shariah Boards and Shariah Committees. Some of them are even advising their rivals.
This is so in Pakistan. In Malaysia, one such scholar cannot serve on more than one board or committee at a time. It would be in the fitness of things if this restriction is imposed in Pakistan also. The problem with these Shariah boards or Shariah committees is that they give conflicting opinions or interpretations that result in confusion or doubt.
It may be possible that one Shariah board, Shariah committee or Shariah expert may approve a particular product while the other one may reject the same with all earnestness. Take the case of Jordan, a Muslim country where a leading Islamic scholar disapproved the penalty imposed on a defaulting modarba client by declaring it a sort of Riba.
Likewise a religious scholar in Britain had rejected an Islamic mortgage on the plea that its structure bore interest in disguise. In Malaysia, Islamic financial restrictions are liberal than in the Middle East or in our own country. Even Islamic banking rules and regulations lack uniformity or universality. It would be better if a national Shariah board is set up to sort out anomalies like Indonesia, another Muslim country.
Malaysia has rightly proposed to set up global standards for both Islamic banking and Islamic finance. Such standards would result in a consensus instead of a confusion or conflicting scenario. Islamic banks have an edge over their conventional counterparts.
They have thrived almost unscathed from global financial crises evident from the fact that while Lehman Brothers collapsed, Islamic Bank of Britain has come out with flying colours by launching Islamic residential mortgage. Islamic banks are not exposed to the hazards faced by their conventional counterparts.