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PRESENTED BY
IQBAL MALIKJUNIOR RESEARCH FELLOW PUNJABI
UNIVERSITY PATIALA
RENAISSANCE OF ISLAMIC BANKING & FINANCE IN CENTRAL ASIA
AND ITS FEASIBILITY IN INDIA
Contents
Factors for novelistic financial inclusion in central Asia Constitutional amendments for Islamic Banking inclusion Economic intensification by Islamic Banking in central Asia Inheritance of Islamic finance in India Implementation process Feasibility Challenges In India Need in India Q & A
Factors for Islamic banking in central Asia
Revival of Islamic infrastructure (Waqaf & Zakat) abolished by the regimes of Stalin and Lenin
Renascence for the inclusion of Islamic economic System Muslim populations in Central Asia favor the promise of Quran based banking
operations over conventional methods to lend money Reaction for the global financial crisis, political decision makers and financial
entrepreneurs in the region were eager to develop new sources for capital .
Islamic Finance in central Asia
First initiatives for Islamic banking, however, were undertaken as early as 1990 in the republic.
A riba-free operating US-based Bank that tried to enter the Kazakhstan market in the 1990s
Al’baraka Kazakhstan Bank opened on January 1, 1991 IDB in Central Asia Each of the Central Asian Republics has joined the IDB: Azerbaijan (1992);
Kyrgyzstan (1993); Turkmenistan (1994); Kazakhstan (1995); Tajikistan (1996); and Uzbekistan (2003). By 1997,
Constitutional Amendments
Kazakhstan, the first post-Soviet state to create a legislative foundation for developing Islamic finance, is making far-reaching plans to expand this financing model. (Kazakh Islamic Finance Law, 12.02.2009). Provisions such as Article 52-1 & 52-2 severely compromise the independence of the bank’s council on the principles of Islamic finance, since the members of the council are appointed by the bank itself.
Kyrgyzstan modified its banking legislation to allow for Islamic banking activities. Eco-Islamic Bank, the country’s first Islamic commercial bank, was established in 2008 with support from the Islamic Development Bank (IDB). the bank held USD65mln in total assets. (Article II of MOU)
National Bank of Tajikistan, drafted an legislative changes to incorporate the operations of Islamic banking. Two Tajik banks have already introduced Islamic banking pilot projects worth USD15mln.
Kauther Bank in Azerbaijan functioning since 1988. but got full legislative support in 2006
Intensification of Islamic Banking in Central Asia
2014 Annual report
Inheritance of Islamic Financial Intuitions in India
Islamic banking has been misunderstood in India as a religious charitable venture restricted to the country‘s poverty-ridden and economically downtrodden Muslim community.
In 19th century Interest free Anjuman Mawdud-Ul_Ikhwan , 1923 Mutual-Imdad interest free was started at Hyderabad which collected 1 lac in 20 years and lend five to six thousand among its one thousand Muslim and non Muslim members.
In 1980 Jamit Islami Hind established 500 interest free societies among them only 300 are working in the regions of Kerala, Maharashtra, Andhra Pradesh, Tamil Nadu, Karnataka, Uttar Pradesh and Bihar
Post 1947 also observed micro Islamic financial intuitions like Muslim Fund 1961in Deoband, Toor Bai-tul-Maal Hydrabad, Muslim Fund Najeeb abad, Al Najeeb Mutual Fund(1990) with 75crore asset and 1.5 lac shareholders in five provinces in the country.
Bai-tun –Nasar In Bombay was established with two limited companies Al-Falah and Itifaq Investment having 1.5 hundred shareholders and 125 crores deposit in 1983.
Indian Association for islamic Economics started by Abdul Azim Islahi, and Dr. Javid Ahmed Khan supervised by Dr. Fazulr Rehman and Prof. Nejatullah Siddiqi presently working at Kerala and Karnataka
Implementation Process
Anand Sinha Committee (2006) under which Islamic Finance and Banking module was sought. 51 pages report including the financial tools in Islamic banking was put forth.
Mr. P. Chidambaram sought the working module of Islamic banking in secular countries. An 80 pages document with primary sources of Islamic banking in United Kingdom, Hong Kong, Thailand, USA, Singapore with reports of constitutional amendments.
Six Member Anand Sinha committee concluded the proposal by saying it don’t match with the traditional banking system therefore needs amendment in Indian Banking Regulation 1949 act or to frame separate constitution for its implementation.
RBI Governor Dr. Raghuram Rajan submitted the report in 2008 in which he recommended for interest free-banking.
According to the Section 17 of RBI Act 1934 section 24 & section 22 of the Banking Regulation Act 1949, Islamic banking is not consistent with current banking laws in India. So government which has to determine whether they want to permit Islamic Banking and if so they have to enact a law that is consistent with Islamic Banking”.
Prime Minister Manmohan Singh had also asked the RBI (2010) to look into the Malaysian model of Islamic banking while referring to the demands for experimenting with interest-free banking.
Dr. Subramanian Swami call Islamic Banking a fraud and a boiled ice-cream. I will not let Islamic Banking to implement in India. It is against the secular fabricIn the letter, Dr. Subramanian Swami has argued that permitting Islamic finance can be politically and economically disastrous for the Indian economy. Islamic banking is violating Indian constitution, by filing petition in Kerala High Court. Latter it was dismissed
Political Challenge
Economically feasible but the banking regulation act is obstacle .
Nomenclature
Dr. Rajuram Rajan Committee named it Interest free banking, Hong Kong (Ethical Banking), U.K an alternative financing, Nigeria Banking with out interest , Turkey Participatory banking.
Philanthropic Economic Institution Recommendation 2008 for Islamic
Banking
Feasibility in India
The primary study of data available through Sachar Committee report (2006) reflects that still around 50% Muslims are financially excluded and banking is inversely related to concentration of Muslim Population.India has the third largest Muslim population in the world around 161 billion (Census 2011) According to Report by Grail Research, part of
US-based management consultancy Monitor Group, India could be a significant market for Islamic banking institutions, provided there is a favorable change in regulatory environment and increased awareness among Muslims and India as a whole.
Religious Feasibility
2011 CENSUSName of the Religion
% to Total Population
HindusMuslims ChristiansSikhsBuddhistsJanisOther religions
80.5 13.4 2.31.90.80.40.6
The Common religious feature among all Indian Religions is about Interest prohibition therefore it is the major gateway for the installation of Islamic/ interest Banking in India.
Manu Simriti (Vedic Scripture) (11:62, 8:152) Quran (2:275-80,3:130, 4:16130:39) Matthew/Luke (5:42, 25:27/6:34-35-38, 19:22-23) Guru Granth Sahib (Kirt-Karo/ bani Jap ji sahib) Tripitak is also against the philosophy of Usury
Thus it is evident that all the above religions are against Interest on money
The Reserve Bank of India (RBI) data report for March 2010 indicates that banking participation in Muslim- concentrated districts is below the national average. They lack in banking access, infrastructure availability and low credit-deposit (CD) ratio. The results were based on an analysis of six districts, which were selected from various states, with fifty per cent or more Muslim share in the population.
Constitutional Feasibility
Since the commencement of Indian Banking Regulation Act it had been amended various times in which amendment of 1988, 1990, 1996, 2000 and 2011 are prominent.
Under the Indian Constitution, right to development has been recognized as a Fundamental Right under Article 21
Fundamental right to receive banking services with out discrimination 34% of the people have access to formal banking services Approximately 500,00 out of 600,00 villages have no banks 80% of Indians do not have insurance Over 40% of India's population have no savings 80% of Muslims in urban India are willing to deposit or invest in Islamic Financial
Institutions on a profit/loss sharing basis. 67% of Muslims in urban India are willing to borrow from Islamic Financial Institutions on a profit/loss basis.
Recommendations The creation of FDIs in central Asian sates will result in the enormous growth of equity
based assets. The creation of Islamic share markets will result in the circulation of wealth and puts
an end to the exploitative capitalistic economic policies. Central Asian states are geographically connected to Indian subcontinent therefore the
possibility of prosperous economic ties between the nations. Muslim trade unions affiliated with Islamic banks will also generate the welfare means. Indian Muslim Council for Islamic Banking and finance IMCIBF regulation Provision in RBI 1949 with Islamic economic Jurisprudence Islamic Banking (branches) network headed by Indian Islamic Bank Islamic Share market baked by Indian Islamic Bank Working Cooperative Credit Societies should function under IIB Last but not least there is a firm need to formulate an International Islamic monetary
fund (IIMF) to cope up the world Islamic banking system
Conclusion It is evident from above discussion that Islamic Banking is the better
alternative for the ethical Globalization and logical surplus convergence Islamic banking and finance as a discipline has evolved both theoretically and
empirically. It has emerged as a lively, challenging and energetic discipline of economics.
It is not an exaggeration to say that it may be interpreted as the dawn of the only alternative to the existing orthodoxy in banking and finance.
There is a prime need for the epistemological interpretation of Islamic Banking There is prime need of unbiased ethical and sound intellectuality in order to promote
prosecute Islamic banking and finance for the upliftment and development of the people living under BPL
JAZZAKALLAHFOR
LISTENING WITH PATIENCE
Iqbal MalikPhD Research Scholar
Punjabi University [email protected]
&Nazir Ul Islam
PhD Research Scholar CCAS University of Kashmir
عليكم والسالم شكرا
