Is Islamic banking truly sharia-compliant?
Manama, Bahrain Feb. 16 – The Islamic finance industry has a problem. Its main selling point is that it is sharia-compliant, meaning it adheres to Islam’s prohibition of interest and avoids dealing with forbidden sectors such as alcohol and gambling.
But in the eyes of many, much of the industry is actually not sharia-compliant at all.
For one, the industry’s benchmark is LIBOR, which is an interest-based concept and critics say it should develop its own. In addition, many scholars complain that the most popular of structures are, if not in direct breech of Islamic law, then widely abused.
“If you believe in Islamic finance and you believe money is just a medium of exchange then a lot of going on is not acceptable, because it’s making money off money,” says Simon Eedle, managing of Islamic banking at Credit Agricole CIB.
So what will it take for the Islamic finance industry to clean up its act? Just your ordinary punter, it seems.
“I think the man on the street wants to do genuine Islamic banking,” Eedle says.
“I think the problem is the business is not yet developed enough to be able to offer anything other than conventional banking in a sharia-compliant format,” he says.
Abdul Rahman Tolefat, the CEO of Allianz Takaful also thinks your average believer will help the profit-driven industry to keep to the straight and narrow.
“I agree, the push will come from the retail side,” he says.
By: Raissa Kasolowsky