Islamic banking poses no threat

Given the times we live in, it is not surprising that an effort to establish a financial institution run on Sharia or Islamic principles should arouse anxiety, not curiosity. Thus, a decision of the Kerala government to give sanction to the Kerala State Industrial Development Corporation to start a non-banking finance company based on Islamic principles has been challenged in the Kerala High Court. It is to the credit of the judiciary that it upheld the government’s decision.

The court rightly held that the joint venture with government participation was to be run in accordance with Islamic principles as well as the law of the land. As such, it could neither be seen to be at odds with the secular principles enshrined in the Constitution nor as a means to support or promote a particular religion.

The High Court pointedly noted that the government’s intention was to derive commercial benefit from the enterprise, and that money from the exchequer would be paid to an institution which did not propose to engage in religious activities such as preaching or propagation. Islam forbids making a living off interest as interest is not seen as accruing from an honest day’s work done, unlike commerce or industry. Indeed, Muslim societies down the centuries have thrived on trade. If an observant Muslim abjures interest earnings, it is hard to see how this injures the spirit of a democratic, liberal and secular order in any manner, as the petitioners sought to suggest. From time to time established Muslim businesses in the country have desired to run commercial institutions, including banks, on the Sharia basis of eschewing interest payments.

While the unrequited demand for such enterprises has not been quantified, it is well known that Islamic banking products are offered by leading banks in the West. Assets in this category were estimated at about $400 billion in 2008, compared to $100 billion in 2000 — a four-fold rise in as little as eight years. Many Muslims in India stay away from banks in the fear that normal banking practices are not in keeping with their religious norms. In order to mop up savings from such an extensive source, it makes sense to let banks tap into this vein.

This should enlarge the country’s capital base and help direct it to desired objectives. The High Court order has permitted the setting up of a non-banking financial company. On the strength of this, it is possible to take the next step of moving toward Islamic banking within the confines of the normal laws of the land. All aspects of the Sharia are far from being violative of the spirit of modern democratic life. Indeed, in many respects, the guiding principles of Islam are meant to mould societies in the direction of equity.

There is no need to be apprehensive about any of this in a country which has the second largest Muslim population in the world. Unfortunately, atrocities are being committed on ordinary people — mostly on Muslims themselves — in the name of the jihadists who profess political Islam. It is probably this which raises concerns about giving grounds to Sharia rules in any aspect of life.

http://www.deccanchronicle.com/dc-comment/islamic-banking-poses-no-threat-152

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