Islamic Banking & Finance

…a treatise by Mehboob Makhdoomi

Dr. Javid Iqbal
Srinagar, Publish Date: Nov 17 2017 11:07PM | Updated Date: Nov 17 2017 11:07PM
Islamic Banking & Finance

Mehboob Makhdoomi’s treatise could be taken as pioneering work in Kashmir in the academics of Islamic banking and finance. The author is convinced that Fiqh eConomics is the way forward and he has an unending reservoir of compelling arguments to back his claim, mainly the Shariah principles, which may be summed up as risk sharing, asset based with real growth, and not financial engineering. In conventional banking in vogue, risk is transferred rather than shared, argues Makhdoomi. Investment should also be Sharia compliant, thus it leaves no provision for dealing in businesses related to alcohol, drugs, casinos, armaments etc.  It was a year or two back when Mehboob Makhdoomi asked me to write a foreword to the book. In my foreword, I dealt with the historical aspects of the issue, starting with practice of usury prevalent in Medina prior to the advent of Islam. We may have a look at it in order to understand the background of interest free banking in Islam.

In the pre-Islamic era, two tribes of Medina—Banu Aas and Banu Khzarj were fighting a seemingly unending war, aided, abetted and financed by Jewish money. It came from Jewish tribes in suburbs of Medina, the purpose being to bind the two tribes in an unending cycle of lending on interest, which compounded due to default in debt servicing. Jewish purpose was to hold the Medinite economy in its grip. Jews were financing the media of the times—poets with praise for their own tribes and condemnation for opposing tribes. The poetic cycle of eulogy and elegy continued unabated. Tired of unending cycle of warfare, Medinite tribes approached Prophet Mohammad (pbuh). Making Medina his abode, he offered a commonwealth of Medinites, the migrants, and the Jewish tribes. Medinite declaration did not suit Jews, they backed out. Usury was banned; Jews were effectively checkmated, their financial stranglehold broken. 

In recent centuries, banking in Europe was started by Jewish business cartels to safeguard their money from the preying eyes of European monarchs, apt to use Jewish money to finance their wars. Banking resulted in lending money on interest and it promoted Jewish stranglehold on global economy, and media as well, as big media houses were Jewish owned. What had happened in Medina on a micro-level is happening worldwide on a macro-level. It is with this background that alternative banking is being assessed worldwide and Islamic banking is taken to be a role-model. Mehboob Makhdoomi in a series of essays explores the prospects of Islamic banking, while comparing it with the conventional banking practices in vogue worldwide.

The book as such is a compilation of various essays, that however does not take away an aura of continuity, as the essays carry the theme of Islamic banking, only difference being its relevance to different situations, such as financial state of Greece and its impact on global economy, the relevance of Islamic finances vis-à-vis IMF, Singapore, Pakistan and Iran, introduction of Islamic banking to India, given its huge Muslim population. Particular emphasis is laid on Islamic banking in Kashmir; the essay is titled as, ‘My tryst with Islamic Banking in Kashmir’. The author makes a plea to introduce the subject of Islamic Banking & Finance in the curriculum of Kashmir University. 

In the opening essay ‘Biggest Secret of the World Economy’ the author in very strong words calls it a fraud, a pyramid scheme, a Ponzi scheme and a lie. He sums up his contention by calling the system evil, a form of enslavement, based on phony ‘IOU (I owe you)’.  In the essay on Greek debt crisis, what the author calls ‘Grexit’ he relates the disaster to global financial system. Apart from Greece, Ireland has received a bail-out; Portugal and Spain are facing financial crises. In an essay on Islamic Finance: IMF, Singapore, Pakistan and Iran, the author cites the advances made by the countries named, and the interest expressed by IMF in Islamic banking. In the essay next, ‘Introducing Islamic Banking’ he argues for a place for Islamic Banking in India, citing the supporting remarks of former RBI Governor—Dr. Raghuram Rajan۔  The author rues the lack of an academic basis for introducing ‘Islamic Banking’ as there are just a few universities with courses related to Islamic banking. 

The author follows with ‘My tryst with Islamic banking in Kashmir’ and cites the efforts made by civil society grouping—KCSDS, which took up the plea of introducing Islamic banking in the university curriculum. The plea has been heeded; it is hoped and prayed something tangible comes-up.  What is relevant to state of J&K in author’s opinion is opening a special window by Jammu Kashmir Bank (JKBSW) for interest free/Shariah compliant products and services. The author favours it to be incorporated suitably in a letter of request/presentation/representation by JKB to RBI. Islamic banking, as and when it comes into vogue in JKB would involve whetting by Sharia experts and subsequently by governing board of the bank. It may be noted that as per recent newspaper reports, RBI has been rather cool, contrary to supporting remarks of Raghuram Rajan.

Two of the most interesting essays in the book relate to ‘Sukuk’ the Islamic bonds and   ‘Takaful’ Islamic insurance. The book has been edited by Prof. Shabir A Bhat—Professor in the business school of Kashmir University. Prof. Shabir has impeccable credentials; he has authored books and his scholarly work has appeared in various reputed international journals and magazines. His editing has added several notches to the work in hand.

Published by Jay Kay books, reasonably priced, 114 pages carry all you may like to know about Islamic banking. 

Yaar Zinda, Sohbat Baqi [Reunion is subordinate to survival]