20.2 C
London
Friday, April 12, 2024

Pause For Thought

spot_imgspot_img

Islamic Finance and Political Islam

Gone are the days when some people looked at Islamic finance with suspicion – assuming this to be a kind of a Sinn Fein for IRA, in the context of extremist Islam. The greatest cynics in this context are the likes of Timur Kuran1 who tried to establish linkages between political Islam and the emergence of Islamic banking and finance. In wake of the incidences that happened around and after the 9-11, there has been greater scrutiny of Islamic banking and finance. This, however, resulted in the establishment of no-causal relationship between Islamist movements and Islamic banking and finance.

However, there is no denial of the fact that Islamic finance has prospered and progressed more in the jurisdiction where it enjoys political support. As much as some proponents of Islamic finance wish to delink it from politics, it remains a fact that the likes of Dubai Islamic Bank, Kuwait Finance House and Bank Islam Malaysia – and many more – have and continue to enjoy support from governments of the jurisdictions in which they operate.

Even in some jurisdictions where Islamic banking and finance has apparently been treated with some kind of indifference, it is now being deemed as a kind of ‘implicit’ support in retrospect. SAMA, now re-named as the Saudi Central Bank, has rightly been seen as a tough regulator for Islamic banking and finance. Some analysts believe that the fact that SAMA didn’t officially recognise Islamic banking for long – and hence didn’t create a separate regulatory framework – actually helped Islamic banking and finance to emerge as a truly competitive phenomenon.

If it is true that Islamic banking and finance hasn’t benefitted from the patronage of Islamist movements around the world but rather has come into being owing to explicit or implicit support of governments, what would ensure that it doesn’t end up, now or in the future, in hands of the Islamist movements. This question assumes even more importance in wake of technological advancements which have improved connectivity of individuals exponentially.

Despite the tall claims of the earlier proponents of Islamic banking and finance, the Islamic financial instruments currently being used do not pose any credible challenge to conventional finance and are in fact, deemed as two friendly cousins. If true, then what does Islamic banking and finance attempt to achieve, if it does so at all? Does it have a hidden political agenda closely guarded by a kind of invisible Council of Elders?

Critics would tend to argue that Islamic banking and finance attempts to achieve ‘nothing’ – nothing substantial to put it mildly. Advocates, on the other hand, would ridicule any reference to a hidden agenda, as there is no equivalent of the Knights Templar on the back of Islamic banking and finance.

If so, this is a sad state of affairs.

For an optimist, it may still be a live cause, hoping to see something substantial emerge, albeit inadvertently.

The success of Islamic banking and finance in some jurisdictions is paving ways for the rise of Islamism. Many would also argue that the nature of Islamism is also changing2. Hence, an emphasis on Islamic identity with the help of Islamic banking and finance should be seen as a post-Islamism phenomenon. Whatever be the exact causality from Islamic banking and finance to Islamism/post-Islamism, there is some Timur Kuran, along with Mahmoud Elgamal, are perhaps the most influential critics of Islamic banking and finance. The Islamic banking and finance industry has chosen to ignore them completely but it is a fact that they provide the most credible criticism of the practices that fall under the umbrella of Islamic banking and finance.

THE SUCCESS OF ISLAMIC BANKING AND FINANCE IN SOME JURISDICTIONS IS PAVING WAYS FOR THE RISE OF ISLAMISM. MANY WOULD ALSO ARGUE THAT THE NATURE OF ISLAMISM IS ALSO CHANGING. HENCE, AN EMPHASIS ON ISLAMIC IDENTITY WITH THE HELP OF ISLAMIC BANKING AND FINANCE SHOULD BE SEEN AS A POST-ISLAMISM PHENOMENON.

Anecdotal evidence emerging that the countries where Islamic banking and finance enjoys more state/government support than other countries where it is struggling vis-à-vis political support, it is more a religious phenomenon than just a commercial enterprise. Pakistan is one of the best examples – if not the best – in this respect. The recent judgement by the Federal Shariat Court of Pakistan requiring elimination of interest from all economic activities and the reluctance of the state institutions to implement it would bring the radical Islamist elements and Islamic financial institutions closer.

In neighbouring Afghanistan, however, the new Taliban regime may wish to use Islamic banking and finance as a tool for attracting foreign direct investment. It must learn from the experiences of Malaysia and Qatar to promote Islamic banking and finance. If it does so, there may come a day – sooner and later – when the people in Pakistan will be looking at their Islamic financial/economic model with envy. After all, lately, Pakistan is getting used to being envious of the economic performance of many of those who according to them (Pakistanis) ‘learnt’ from them or adopted their economic models. There has been a lot of reference in Pakistani social media of the economic success of Bangladesh. Good for them that they decided to say goodbye to Pakistan in 1971, and worked for their own destiny. Now, it is perhaps the time for Afghanistan to take a similar route.

Afghanistan already has one fully-fledged Islamic bank and a few conventional banks offering Islamic financial services. With the intent of the new government in the country to ensure that no activity in social, political, commercial and economic spheres is in conflict with the tenets of Islam, the establishment of a working model of the Islamic economic system will allow Afghanistan to attract the attention of many foreign players to establish Islamic financial institutions in the country. The new government must seek help from Qatar that played an important role in mediating between them and the occupying allied forces. It is indeed an excellent opportunity for Qatar to seek long-term strategic investments in Afghanistan.

On a general level, it is an excellent opportunity for the governments in Muslim countries to use Islamic banking and finance as a tool for socio-economic and political reforms. It is not a threat to anyone. Rather it should be taken as an opportunity for economic cooperation and growth.

Subscribe

- Never miss a story with notifications

- Gain full access to our premium content

- Browse free from up to 5 devices at once

Latest stories

spot_img

LEAVE A REPLY

Please enter your comment!
Please enter your name here