Professor Humayon Dar
Editor-in-Chief
The market is a dynamic organism. Ever in flux, the demands of consumers remain the food of speculation for businesses. Demand for goods deemed necessary can be provided for easily. But the excitement of the markets remains when businesses create a product previously non-existent and encourage the demand. In economic terms, demand can create supply but supply can also create demand.
The inception of Islamic finance was very much a case of demand creating
supply, and it will always be the case, as Shari’a-sensitive consumers require financial products that adhere to the prescriptions of the Shari’a. For the creation and innovation of financial products to succeed, it has to meet both Muslim requirements and the dictates of Shari’a. More than that, Islamic finance needs to be the harbinger of dynamic development in the commercial markets. Unfortunately, thecreation and innovation of new commercial, non-financial products remain marginal in the Muslim world. Islamic finance does not do enough to promote this in the commercial markets.
Fundamentally, the problem resides in moving away from the equity-orientated nature of Islamic finance. The intellectual purpose of ISFIRE is to readdress the balance, bringing the industry back towards a focus on equity-based products rather than predominately a permutation of debt-based products. The starting point is therefore on entrepreneurship, and in this issue we explore it in greater depth.
The writings of Professor Kabir Hassan have undoubtedly been an asset to the intellectual maturisation of this industry. Along with Professor Rasem N. Kayed, they analyse the centrality of entrepreneurship to Islamic finance. Concentration on developing entrepreneurship will shift the product development process and broaden the Islamic financial institution’s impact on wider society. It will also change perceptions. For far too long the industry has been accused of being reactionary and not inventive. It is true that the industry had to push the boundaries of Shari’a acceptability, but after 40 years, the foundations have been set. It is time to move forward.
Dr. Naif Al-Mutawa represents the potential of investing in ideas. The affable creator of the comic ‘THE 99’ took the time out to speak to us about superheroes originating from Islamic values, which for him are universal values. Unicorn Investment Bank (now Bank AlKhair), an Islamic financial institution, were one of the first funders of ‘THE 99’. As the global popularity of ‘THE 99’ increases, with its evocative themes of unity and cultural understanding, the background of the comic comprises of an Islamic financial institution providing the initial lifeblood. What greater an example is there of the potential of Islamic finance to encourage entrepreneurship?
Islamic finance has to be more than just prosaic financial technicalities. It has to link itself firmly with the ‘halal’ industry. One of the criteria for Islamic stock screening is ensuring businesses are not offering products deemed Shari’a repugnant. Lycamobile, a growing telecommunications company, is the type of business idea that the Shari’a encourages. Their products have been created to bring people together in today’s global village. With cheap rates, CEO Mr Milind Kangle and Chairman Subaskaran Allirajah deserve recognition for the good work they have done. They are the subject of the Company Profile.
Entrepreneurship has to be encouraged in impoverished or war-torn communities too. Microfinance has proven to be effective in encouraging entrepreneurship in villages throughout the world. Dr Mohammed Kroessin discusses the current state of Islamic microfinance and what needs to be done to improve its value proposition. He sees substance but is also aware of the challenges that need to be overcome. Islamic Relief Worldwide is actively involved in setting up Microfinance programmes throughout the world.
Layla El-Wafi and Assad Riyany explore the potential of Islamic finance in post-Gaddafi Libya. Two things are clear: firstly, there is government interest in Islamic finance as seen by the passing of the Islamic Banking Law in May 2012; and secondly, there is a strong demand for Islamic financial services. In the rebuilding effort, domestic and international investment into infrastructure and the generation of a dynamic commercial sector will push Libya forward.
Rizwan Rahman has written two articles in this edition. The first look at the Keynesian ideas of improving capitalism. His thoughts can be harnessed for the benefits of Islamic finance. The second article concludes the investigation of the Mondragon Cooperation. According to Rizwan, greater connectivity between communities, financial institutions and commercial organisations can improve the value proposition of Islamic finance.
We believe that ISFIRE is taking shape, with sections being consolidated and defined. Our hope is to establish a publication that fully reflects and promotes the Muslim economic contribution to society. We hope for your support as we continue this process.
