We live in a world where the majority of us are so used to only one way when it comes to economics and finance, which is the conventional or riba-based system. Ask the man-in-the-street what denotes riba, and he would be hard-pressed to provide the answer. The general education school syllabuses do not provide information on what is riba and what is not riba from a practical perspective or modules related to Islamic finance. So, it is difficult for a common man to distinguish what riba is in our economic and financial systems. They have put their faith in a ribawi system for many generations that doing the opposite of their usual practice is unthinkable to them. Unless the mindset changes, riba will remain as part of our economic and financial systems.
A large part of the business community tends to eschew a riba-free system due to their lack of understanding of what a truly riba-free system has to offer. There are those who believe Islamic finance is religiously motivated to create segmentation among the population based on religion rather than serving mankind using ethical principles of financing. Their mind is set on the fundamental philosophy of making-money-out-of-money by transferring all the risks to the customers or debtors by way of simple interest and compound interest. Therefore, they could not comprehend the risk-sharing nature of Islamic finance that is based on sale or lease of an underlying asset or creating an equity relationship between the parties with the common view of generating profit from a real economic activity.
So how long will it be before the Islamic financial system is fully embraced by the masses, regardless of religious background? It depends from jurisdiction to jurisdiction. The legal system plays a major role in that a legal inhibition slows down the growth of the Islamic financial system. However, at the end of the day, it is the demand that will eliminate this barrier and all the other encumbrances preventing the growth of the industry. So, the most simplistic answer to this question is that the Islamic financial system can get out from the experimental era only with the political will and support from the respective governments and concerned stakeholders. Malaysia is the best proof of what a strong political will and a well-laid infrastructure could do to boost the Islamic finance industry. Islamic finance has passed the experimental era in the country with full support from the government and stakeholders and is now considered as the cranium of Islamic finance in the world. It must be said though that one formula may not work as well for everyone. Respective countries also need to formulate their own strategic agendas to develop and sustain Islamic finance in their jurisdictions. Collectively, the individual efforts of the respective governments will impact the global Islamic finance industry.
Why awareness matters
That said, awareness and lack of the right talent pool is the biggest hurdle facing the growth of Islamic finance today. Universities like INCEIF could and already are assisting in resolving these issues.
We need to develop professionals who understand 360 degrees of Islamic finance. It is high time that we realize that for the Islamic finance industry to sustain and grow, it needs more than Shariah scholars. We need professionals from multi-disciplines equipped with Islamic finance knowledge. Lawyers, businessmen and accountants also do require Islamic finance knowledge. The classical belief that only Shariah scholars are required for the Islamic finance industry needs to be eliminated. The industry needs skilled talent from a wide range of disciplines that could learn from a well-rounded curriculum developed from a strong collaboration between the academia and industry.
Appreciating its benefits
Above all, everyone – irrespective of their faith convictions – must be able to appreciate that Islamic finance provides benefit to all mankind. The principles of Islamic finance are beneficial to all as it negates evil to all. The system of bai’ or trading provides benefit to all participating in it without overexploiting each other. Furthermore, Shariah governance principles adhered by Islamic financial institutions make it attractive from a governance perspective boosting the confidence of customers with infinite trust.
From an ethical perspective, in these days of Green or responsible finance, now more than ever before, the proponents of this way of life should find Islamic finance attractive. The quality of products and services offered by Islamic financial institutions also plays a vital role in this. For example, the terms and conditions of Islamic finance products should be more favourable to the customers and at the same time, it is more profitable. Not having compound interest feature itself, is a factor that should steer people of other beliefs than Islam towards Islamic financial products.
By Assoc. Prof. Dr. Aishath Muneeza
*This article first appeared in Wahed Invest Journal on 10 February 2019.