Islamic banking known to be of more benefits as it’s according to the laws in Islam. Islam is religion of believing in the Oneness of Allah. People accept Islam when they know the truth behind the purpose of their lives in this world. Yes, Islamic Banking is common in Islamic countries.
Money cannot be sold for profits or making more money out of the use of money only. Money is permitted to be used as it needs to be. The Islamic laws prohibit paying any amount for renting of money (Riba). Islamic laws never allow any investment in illegal businesses. Businesses needs to be in accordance with the principles of Islam. These principles mentioned already in the Glorious Quran.
Benefits of Islamic Banking
Islamic Banking is a banking system and a financial institution like Tabung Haji in Malaysia. It was originally built because of high demand of interest-free money for pilgrimage (Hajj & Umrah). This wasn’t possible with the format of conventional banking system. Tabung Haji in Malaysia is a successful Islamic bank and it was established in 1963. The bank, initially had a total of 1,281 depositors. But, since then the depositors increased to 8,67,220 and with their deposits reaching over 1 billion.
Thus, more Islamic banks established throughout the world. Small scale Islamic Banks also existed in the 1960’s in Egypt. The success of Islamic Banking led to the establishment of the Naseer Social Bank in Cairo in the year 1972.
Later, the International Islamic Bank for Trade and Development was also proposed. International Islamic Development Bank promoted economic development of the Muslim community and so on.
Islamic Banks to Benefit India…
Islamic Banks operate with an interest free banking. Riba or interest under Islamic Law is unacceptable. It means that the investor should not make any profit over the halal earnings of others. A reasonable profit and return from investment is the mode of operation for Islamic Banking. The investor can take risk and that should be calculative. Islamic banks use available accounts, which provide profit or loss instead of interest rates.
Islamic banks utilize the money collected and invest in projects, which the Islamic law allows. It means investments not made or involve harraam businesses (Illegal Businesses). And this involves no high risks. Businesses including alcohol, drugs, war weapons etc. and all other high risk activities prohibited. Islamic Banking collects the money on behalf of their customers, who then invest in legal projects. The Islamic Banks share the profits and losses with their customers.
Islamic Banking covers the requirements of the consumers in the best possible way. Profit sharing and joint venture are two most important aspects of Islamic Banking.
Islamic Banking was also suggested by former RBI governor Raghuram Rajan in his report on the Financial Sector in the year 2008. He wanted India to adopt Islamic Banking. He felt that interest-free banking techniques should be operated on a larger scale in India. It was suggested to give access to those, who are unable to access banking services. People belonging to economically disadvantaged section of the society also can benefit with.
Why Islamic Banking benefits?
Islamic Banking is common in Islamic countries. Plenty of non-Islamic countries also opening Islamic process in their conventional banks. They formed departments within the banks and they offer products to the customers in the Islamic way of executing bank transactions. China, United Kingdom, United States, Germany also offer Islamic windows.
The United States formed the American Finance House LARIBA, which is Islamic financial institution. And is involved in auto, business, trade financing, hedge fund investing etc. The United Kingdom also allowed their first Islamic Bank of Britain to operate. UK was the first Non-Islamic country to benefit with more facilities of Islamic system of banking.
The advantages in introducing an Islamic way of process in the banks are much more than what people think of. Majority of companies in the Stock Exchange benefit with Islamic way of banking and this would result in attracting bigger funding.
Islamic Banking encourages many people from the Muslim community to come forward and invest in projects. Thus, huge amount of capital to be held for more profits to the banks with ease of no high risk factors. India also can attract huge investments from West Asia. And from those who invest only through “eligible in Islam” projects.
This Change can Bring More Benefits
Indian banking laws need to be changed a bit or more as per the cause or effect of remaining interest free. The provisions relating to Islamic banking needs to be adopted. Banking Regulation Act requires payment of interest, which is against the principles of Islamic Banking. The Act also specifies “banking” to mean accepting deposits of money from public for lending or investment. However, excluding the instruments of Islamic banking that promote profit and loss. That’s fair enough.
RBI proposed recently for opening of an Islamic Banking system in India. But, the proposal received mixed responses and in the light of the Uniform Civil Code debate, it’s forgotten now. And took a political angle instead for a financial purpose.
More Benefits…
It is recommended that using banking services of any kind need not interfere with the use of another. If India brings in the windows of Islamic Banking in every State then this will be huge benefit for Indians. Indian Banks are on a high risk of losing customers. People not preferring to invest in banks because of the major recession since early 2020. 2020 is the eventful year and also this year hidden the failure of BJP govt due to the COVID 19 Pandemic. It will be good if India joins hands with unity among every sect to cover up the losses.
Let’s not forget that ignoring Islamic Banking on the reason of hatred with Muslims in India might not be helping. India gets huge help from the Muslim countries and so to benefit more India needs to be smart enough. More awareness of safe processes and transactions will benefit India more. India was the fastest growing country in terms of all sectors relating to economy and more.
However, the divide and rule shattered the dreams of the major population of India. All Banks currently in India are under high risks and this is a major concern.
