Because of the current economic quagmire, many western intellectuals are giving a second look to the Islamic financial system and studying it to see how it could have protected the users from the economic mess. There is a debate in certain sections of the world as to which system is more robust and inclusive. And which wouldn’t end up giving a heart burn to the common people.
With that in mind, lets take a look at the Islamic Financial system and see whats it merits and demerits are and lay the discussion to rest for once and for all.
Consistency and sustainability are the foundation stones of Islamic Banking System and the entire financial world is the witness of the same. The prevalent economic crisis has rigorously affected global financial markets. However, it could not sway the tombstone of the Islamic Financial system.
Over and above, a sustainable growth was witnessed in the system and the subject to which, 27 Muslim and 15 non-Muslim nations invited the Islamic banks in hope of getting sustainability in their financial sector. The principle basis of this economic system is the Islamic law- Sharia.
This law restricts fee payments for rent facilitation in particular terms and also forbids any such investment, which is categorized under Haraam in Islam.
Benefits of Islamic Banking System
The cause behind the unsurpassable Islamic Banking system is not a single one. There are a variety of options responsible for this stupendous sustainable financial system. After the sinking crisis of world economy, some of the causes that were dug out for the unfailing system were.
Firstly, the pragmatic interest policy in the Islamic financial system was one of the major factors attracting the affluent investors of Arab, which accumulated the system a strong base.
Secondly, it was the 9/11 attack, which made Islamic Finance (IF) get a clear escape from the West and its concentration was on the potential markets found vulnerable.
The third factor, which was the most crucial one, was the platform of the conventional financial system, was on the verge of breaking down and thus people lost trust in it. They found IF System to be sustainable and equitable enough on the grounds of interest policies to survive in this hailstorm.
Other factors included prohibition of transaction based on interest resulting in augmented trades and business opportunities, which generated IF System legitimate profits. Moreover, the intrinsic wealth of IF greatly supports in overcoming potential risks. The highly transparent IF System adopts the policy of risk and profit sharing, which guides the market to invest accordingly.
Merits of Islamic banking option
So, there are a bundle of reasons for investing in IF System. Have a glance at some of the outstanding ones.
* The pragmatic policy of interests
* Strict prohibition of Haraam
* Its escape from the Western Economy
* The intrinsic wealth
* Transparent policy system
Demerits of Islamic banking option
But, as every coin has two sides, so does the IF System has. Some of its dark aspects of IF System are:
* As the scholars of Islam follow the rigid conservative religious patterns, they decline derivatives.
* The banks never have enough liquidity for unforeseen situations and when compared to conventional financial systems, it’s a major drawback.
* Risk protection needs of IF System are ever increasing due to increased traffic of financial markets.
Thus, the wise words of wisdom says that before jumping upon any conclusion, magnify the situation and ponder upon what are your needs and up to what extent the financial system, you are opting for, is complying with you.
All in all, I would say that we in the western civilization have something which is more rock solid although it would be harder to agree given the current economic mess, but we can definitely come out of it a better nation.
I read somewhere that any who partake of the Islamic Financial System become subject to Sharia laws. I suppose if all of the western countries joined together and formed it’s own banking system, no doubt it would be a huge success just as all the islamic countries banking system has become successful. No thanks we should not want any part of anything islamic as it is a trap to suck non islamics into becoming and eventually being forced into the islamic faith. We are almost at the door, those people have a plan and that plan is to conquer the whole world for Islam/allah and thier plan is to do it by conversion, have you not noticed that there are mosques all over in every country including the US, yet you will not find one religious place of worship other than islamic mosques in any islamic country. If they cannot do it by trickery and conversion then it will be done by the sword. If you take the time to read and understand the koran, it’s all there
You are uneducted and ignorant. I fear someone like YOU who has such outward hate.
Al has it right on. Not all muslims are terrorists and this forum is to discuss the benefits of IF, not the religion behind it.
Get your facts straight sweetheart before you open that mouth of yours.
Assalamualikum (Peace be upon you) Beth
Any Islamic Systems as laid down in the Holy Quran [The only Holy Book from God which is authentic an unadulterated] is good for all mankind. As we know that drinking of alcohol destroyed society; free sex has resulted in HIV, Farming of pigs resulted on H1N1 that kills millions. Now the conventional financial systems destroyed financial situation of families.
Back to Islamic Financial Systems, you do not have to worry. You are going to be forced to be Muslim. Similarly if you do not drink alcohol you no need to be Muslim. Many Non-Muslims do not drink alcohol., and Many Non-Muslims do not eat pork. In Malaysia does who participate in Islamic Financial Systems are majority Non-Muslims [Buddhist, Hindu, & Christian)
I did attended in one of the Catholic Church Sunday Service - the priest in his sermon advised the church members to invest in Muslims Companies in the Malaysian Islamic Stock Exchange - the reasons are you are sure the investments are clean [no gambling, alcohol,etc].
Best regards Beth, and I am sure with postive and open mind you may agree with others Non-Muslims who participate in Islamic Financial Systems eg. Hong Leong Islamic Bank, CitiBank Islamic bank, Standard Chartered Islamic Bank, and many other Western Bank is opening up Islamic bank.
Best Regards and wishing you every success in your endeavor in life. Ameen.
Mr. SHAYA’A OTHMAN
Thanks for your comments Beth. Islamic finance is certainly an interesting subject to further discuss and explore.
In response the Beth’s blind perspective:
A few power hungry people – as found in any religion historically – are preaching through purposeful misinterpretation of the Koran resulting in a massive following of extremists. There are many muslims that have a completely different perspective and respect the views and religions of others.
I would like to add, this is not a place to discuss religion rather of the benefits/criticisms of a financial methodology. We may want to keep it this way moving forward. There are other forums for religion talk.
Thank you for the good thoughts about Islamic Finance principles.
Believe me I worked for both banking institutions of conventional and Islamic nature – there is no any special difference for entreprenuers who is not just duscussing, but looks for better financing opportunities. I as an Islamic banker have had most non-Muslim borrowers who succeeded in their businesses and did not put any religious dogms or tips. What have they noted in IB – its principles are of general features such as transparency, strong risk management (on double level – official regulatory and Sharia supervision), PLS (fair profit and loss sharing) and avoidance of payments of multiple fees, commissions, penalties and especially interests. In any case, even Vatican authorities recognized the faithful and true values of Islamic finance that just identify the idea of the One God.
Islamic banking option strictly based on principle of Shariah law [Islamic law based on Holy Quran]. It is good to understand especially for Non- Muslims, what are the ultimate objectives of Shariah [Maqasid al-Shariah.
Islamic Banking looks beyond "free interest" or known as riba in Arabic. Unlike conventional bank, Islamic bank is subjected to the ultimate objectives of Shariah [Maqasid al-Shariah] which include the following:
* 1. Protection of Human Life
* 2. Protection of Religion
* 3. Protection of Human Generation
* 4. Protection of Human Intellect
* 5. Protection of Wealth and Resources
Having understand of Maqasid al-Shariah as mentioned above, one must not be worrying that by practicing or establishing Islamic Bank, one has to be converted to Islam. Islamic Bank which is governed by Maqasid al-Shariah will protect human life, religion, human generation, human intellect, and human wealth and resources.
Although profit is necessary but it is not the ultimate objective of Islamic Bank.Profit is just like “oxygen which is necessary for us to leave but it not our objective of life”. The ultimate objectives of Islamic bank is as discussed above.
Mr. SHAYA’A OTHMAN
Beth, you are not alone. Shariah finance is “Jihad with money” as Sheikh al-Qaradawi so eloquently stated. Part of Shariah finance is that some proceeds must be donated to ISLAMIC charities. At last checki, 27 Islamic charities were fonts for funding terrorism and anti-American organizations. The Muslim Brotherhood has a very far reaching plan to backdoor Shariah law into the West and America. It’s already happening in Europe. Holland is a lost cause, and Britain is following close behind. as messed up as our system is now, I will never believe that anything Islamic is a cure.