The collection of essays titled, ‘Islamic Banking and Finance: Fiqh eConomics Is The Way Forward’ by Mehboob Makhdoomi is an interesting read for understanding the concept of Islamic banking and finance. The author is a Harvardian & has an MBA from a University in Pennsylvania, the United States, with a Research degree from Cardiff University, United Kingdom. The book presents Islamic banking and finance as a robust and viable alternative to conventional banking and talks about the modus operandi and the pathways for its effective implementation in the world particularly in India and J&K. Islamic banking is shariah based, and works on interest-free, risk sharing and not risk transfer methods along with transaction backed by asset or asset-based real growth and investment in shariah compliant activities. The beautiful thing about the book is clear, coherent and lucid language of author that even the audience with no prior knowledge of Islamic banking or economics per se feel at ease while reading the text.
The foreword of the book is written by Dr. Javid Iqbal – a Kashmir based columnist in which he briefly presents the necessary information about the exploitative banking system based on usury, highlights the essence of Islamic financial system and explores the possibility of successful implementation and flourishing of Islamic Banking and Finance in J&K.
Beginning with the introduction to global economy , the author exposes the secrets with evidence underlying its functioning, how money is created out of thin air and how this system is nothing but just the supply of numbers run through financial engineering and sums up by demonstrating this system as evil and form of enslavement that just widens the gulf between rich and poor. He then exemplifies the crisis by quoting the 2008 sub-prime mortgage crisis and Greek economic crisis and opens up the horrible face of conventional banking system, instability and vulnerability of which is such that the system can crumble anytime under its own weight. He continues and observes that the failings of the modern economy paves way for gaining currency and acceptability of Islamic banking across the globe.
The author gives a detailed account of the successful working of Islamic banking that could not just withstand the 2008 US sub-prime mortgage crisis that developed into full-blown international banking crisis but also fared well when conventional banks were filing for bankruptcy and massive bail-out of financial institutions was employed. With compounded growth rate of 17.3%, Islamic finance has now emerged as the fastest growing sector in the financial industry with a market in range of $1.66 to $2.1 trillion and an achievable expectation of $3.4 trillion this year.
The appreciations to the successful model of Islamic finance have a global tune with more than 50 countries including the modern secular and industrialized countries like UK, Singapore, France, Japan and Hong Kong having adopted Islamic banking. The observations have revealed an equal attraction from non-muslims who find Islamic banking model ethical and socially responsible, based on real economic growth .
The book then talks about the Indian state that hesitates to permit the Islamic model of banking in the country with 200 million muslim population. Since the current banking laws are not consistent with Islamic banking system, the book talks about the possible ways to introduce Islamic banking in India including that of amending the current banking laws by following the examples of other countries or opting for NBFC option (Non-Banking Finance Corporation) that doesn’t fall under Banking Regulations Act 1949. The author points to Kerala government initiative of allowing NBFC based on Islamic principles and asks Indian state to stop hesitating and take note of recommendation made by CFSR headed by Raghuram Rajan to allow interest free banking in India and the report of the committee on medium-term path on financial inclusion headed by Deepak Mohanty that recommended in strong terms to allow Islamic finance for the betterment of financial health in India. There are no economic issues that hamper optimistic approach in this direction, instead it is more about the right-wing religious politics of India that hinders India’s growth opportunities by delaying Islamic banking in country.
The author being the founding head of ‘Islamic Banking Kashmir’ (IBK) – a Research, Advocacy and Awareness group based in J&K is particularly passionate and concerned about introducing Islamic banking in J&K. The author proposes a roadmap and discusses the possible ways of introducing Islamic banking and finance in the state. Of the three possible ways to introduce Islamic banking and finance which include either standalone Islamic bank, opening a special window within a conventional bank or to go for NBFC , J&K Bank along with other interested parties can form a pressure group and lobby for atleast a special window for Islamic banking to help vast muslim majority of state fulfill their religious obligations with regards to forbidden nature of interest based banking in Islam.
In separate chapters on Sukuk (Islamic equivalent of bond) and Takaful (Islamic Insurance), book defines them in detail and describes their huge potential in becoming the effective vehicle for mobilizing savings, for capital formation and the long-term investment. In a well-researched chapter on CPEC, author explains how it has come as a gift for Islamic banking and finance to prove its mettle to the world again as the Shariah-compliant modes of finance, most preferably Sukuk, could be used for funding the huge investment in infrastructure and other projects. . The author argues that owing to very good prospectus of Islamic banking all over world, there will be massive demand in its booming job market requiring Islamic Finance experts, thus requests the authorities of Kashmir University to take a lead and introduce this banking model course in curriculum.
While the book is quite enlightening on the subject and explores multiple dimensions of the story, the unnecessary repetition of certain things in the compilation has made it a little upsetting as I believe author could have rather discussed few more aspects and challenges facing Islamic banking. I would suggest this book to readers from experts to commoners, as it widens the understanding of the subject and opens a window for a massive debate and action. The author deserves appreciations for opening the subject especially to people of the state and for actively campaigning for Islamic banking in Kashmir. His efforts in training youth in this direction are a noble endeavor and deserve popular support. Religious organizations especially the workers of the Islamic movement need to consider the efforts and offer researchers and workers for this cause of immense essence.
Author doing Masters in MA Economics at Jamia Millia Islamia, New Delhi
basit.learner@gmail.com