Islamic Banks, Un-Islamic Objectives?

By Omar Javaid

Islamic Civilization emerged and took over the world within a few decades of its birth. It dominated as a superpower for almost 1300 years till it collapsed during the 2nd world war with the fall of Ottoman Empire. Before its demise, lots of revivalist movements within Islamic Civilization resisted and tried all what was possible to prolong its survival, however their efforts weren't enough to breathe life in the lost civilization.

According to Tamim Ansari, three types of revivalist movements emerged, 1^st one which out rightly rejected anything which was foreign to Islamic traditions and demanded Muslims to go back to their roots (Wahabi movement); The 2nd one which recommended to pick up the good things from the western civilization and cleanse it through the process of Shariah compliance (Initiated by Jamaluddin Afghani); and the 3rd one, which rejected the traditional trajectory and proposed to find Islam in the western ways (whose torch bearer was Sir Syed Ahmed Khan)...

Even today we see the three types of movement active in the Muslim world. Here our discussion would focus on the merits and demerits of the 2nd type, i.e. the movement of Shariah compliance of the west.

Take Islamic banking as an example, the banking system, which comprises of lots of private banks, regulated by a central bank which issues currency or money supply to private banks and government. This money supply is multiplied and loaned out by private banks to the public to buy things which they cannot afford with their existing purchasing power. Government also borrows from them when they have to spend more than its revenue.

The question arises why everyone in the modern world want to spend more than what they already have? The answer lies in the ideals of the modern western civilization, the ideals for an individual being or the society as a whole, which requires each individual to maximize his wealth, to maximize his freedom to maximize his pleasure. The banks were created in their present form, to fulfill exactly this kind of a requirement.

The colonizers brought this institution with them to their colonies. The problem was, colonizers (which were Britishers largely) made those people incharge of these institutions who were loyal to them and/or believed in similar ideals. Therefore once Britishers were gone, their institutional framework for public administration, finance, government, judiciary, law enforcement etc. remained as the only form of organized structure in the entire society, managed by the rich and/or aristocratic or/and feudal elite; i.e. the 'Baboo' segment of the society (according to Shahnawaz Farooqi, Britishers called such people Baboo, a term extracted from Baboons).

This institutional framework also had a financial system including banks, stock market, central bank, insurance companies, etc. The system continued till date. The Ulema assumed that this institutional framework is value neutral and replacing of individuals with pious Muslims, and replacing a few prohibited contractual details like Riba, Gharar (speculative dealings), gambling, etc with approved ones will eventually make these institutions Islamic.

There is no doubt on the intentions of the respective Ulema who intended to eliminate those elements from the system which were prohibited by Islamic Shariah, however their approach was exclusively limited to contractual details. They completely ignored the institutional dynamics from a broader perspective and by Labeling such institutions as Islamic, the objectives for which they were originally designed were also legitimized in the eyes of a common man. These objectives (were) are exclusively materialistic, implicitly rejects the idea of success in Akhirah by idealizing the advancement of worldly freedom to maximize pleasure through more and more wealth etc.

Having said this, at a broader level there is an inherent contradiction between the 'Islamic' spirit and nature of institutional structure on which this term is applied after removing a few contractual details. Remember, when objective are changed, the institutional arrangement are also needs major changes.. Imagine a building designed for a hospital is attempted to be converted into a school, imagine the mess it would really create, particularly when such a school will be sold in the market as perfect. Who would be responsible for the irregularities in the educational process then?

At this point it is necessary to explain that Islam doesn't put any limits on earning, and we have seen that various companions of Prophet s.a.w were very rich, however we also know which of their attributes are idealized. Hazrat Usman Ghani r.a. for example was/is not idealized because he was very wealthy, but in the manner in which he spent his wealth for the cause of Islam. And there were lots of Sahaba-e-Kiram r.a.a. who were very poor as well but were equally respected.

The ideals which Islam presents to its followers are achievable for every individual for every economic class to achieve, and has nothing to do with how much wealth you have. In fact Islam prefers a simple and humble life style, so that one’s focus remains on Akhirah and he or she is not distracted by luxuries around him. That is why in most cases pious individuals would be seen living a very simple life, despite how much wealth they own.

A Muslim lifestyle is supposed to prioritize Ibadat, spending time with family, parents, relatives and getting involved in community work. This means he must spent a considerable amount of time in non-commercial activities, as he is not allowed to ignore them. In other words, his commitments with his Creator, Allah s.w.t, and his family are above than his commitment with market place. Furthermore it is essential for him to believe in Taqdeer i.e. his Rizq is predetermined by Allah s.w.t along with his time of death, the woman (or man) he (or she) would marry and how many children he or she would have. Instead of focusing on how much to earn, he is required to focus on how to earn, what things to avoid to make sure he (or she) is earning a halal living etc.

This is not how a westerner prioritizes his life, as we see how committed he is with his family, let alone with his Creator. His only commitment is with market and his life is surrounded by means to maximize pleasure. Therefore western world has evolved banks in their present form to help its individuals achieve the respective ideals.

Now the same framework, as mentioned before, was brought by Europeans when they arrived in the Islamic world. Today these institutions exist and are trying to expand themselves in Muslims societies, thanks to the political support they receive from secular governments. Their employees are graduated from business schools who are indoctrinated with the same set of objectives idealized in the west through the curriculum imported from the west, by the teachers who are trained in the west (or likewise).

Therefore the western institutional models for its expansion would eventually spreads the same values (love of wealth, pleasure seeking behaviour, etc) so that sufficient demand of its services is created among the general public, or their potential customers. As otherwise the public would simply reject or ignore them. In the wake of all this, suddenly Islamic Institutions emerge which tells its customers that 'hi look these western institutions are not doing it right, allow us to help you with the same objectives but in a shariah compliant way'...

So where this would eventually lead us... In the wake of this compartmentalized implementation of Islam, within a sub-sub domain of a structure imported from the west, while labeling the entire thing as Islamic, would it not risk distorting the very ideals of an Islamic society and the means to achieve those ideals?

Would spreading promotion of Islamic banking encourage a segment of society comprising of individuals who prefer a simple life style, who live by their means, and does not compromise with their family roles to make any extra effort in the market to earn more? What kinds of ideals the contemporary Islamic Banking would want to set for its target audience? Anything lesser  than western model would eventually not allow Islamic banks to gain much market share and would only stay behind the conventional banks.

The advertisement of Islamic Banks about dream luxury cars and homes proves just that. What kind of motivations would it generate among the waste majority who can't afford such extragenze? Would it increase or reduce economic disparity in the society? By the way too much economic disparity is considered to be one of the reasons for an unstable society, even in conventional economics. 

The western world, just doesn't sell a unique set of ideals to the world, but also tells how these ideals are to be achieved. Same is the case with Islam. This is not just it, the western approach has its own problems, unique way to define them and solve them. Now if we use a framework of banking adopted by Islamic banks brings some kind of a unique problem to the society then who are we going to look to solve it, and who would be blamed if the show is happening under the tag as 'Islamic'? 

For example, Mufti Taqi Usmani d.b, out of innocence,expects Islamic banks to fulfill the expectation of Islamic Economics, and fears that since IBs are following the same footprint therefore the problems which western financial institutions has caused in the society like restricted circulation of wealth or constant inflation, and reluctance in eradication of poverty. Will this also be hallmark of Islamic banks, who are too much relying on debt based modes of finance uptill now, and cannot much promote equity based tools of finance like Musharakah and Mudarabah, due to institutional constraints... etc.

Isn't it really too much to expect when Islamic Banks really don't do anything any differently, when they have the same structure, compete with the same nature of industry and earn their profits by fulfilling the same kind of customer requirements.

In simple words, Shariah Compliance movement is not spreading Islam; rather it is strengthen a western way of living or socio-economic structure. The western civilization which is already collapsing on its feet, the process of shariah compliance is only proving it to be its supporter.

Its promising to the people that the worldly success and progress just like the western world is possible through shariah compliant means, and which would also not cause problems to the world, unlike western approach.

Like there are lots of articles which suggests if the principles of Islamic Finance would have been injected into the western financial system, then the economic crisis which hit the world after sub-prime mortgage crisis, wouldn't have happened. Or the problems of western democratic model can be solved by making it compliant to Shariah.

But where it is promised that GPD would grow by 10% if the economy would be running on Islamic finance?

The critics exclaim that such a movement of shariah complaince would even lead someday to Islamic prostitution (naozubillah; which might involve artifical dolls or human like robots, or genetically engineered human looking organisms etc)…

So if this is not the way forward for Islam, then what is? This deserves a separate post, hold on tight and wait for next post titled ‘Alternative to Shariah Compliance’... InshaAllah