|
Book
Review:
Reviewed by Preeti Nair In Islamic Banking and Finance: Another Approach, the author proposes a new system that addresses the needs and concerns of Muslims today. The salient features of the proposed system are as follows: 1.
There is no interest on deposits, but capital is guaranteed With these features, the author believes that the proposed system simply avoids the many problems faced by Islamic banking as practiced today, which includes its inability to set up and operate interest-free banks in most countries of the world. These features, according to the author, should also make necessary provisions to curb the problem of inflation, which is not explicitly treated by any system of banking. The system as such can be considered as consisting of several independent modules. However, one or more could be implemented at a time according to the requirements of a given situation. The author says that as far as commercial banking is concerned, there are two major departures from the traditional approaches (conventional or Islamic), and these are very important developments. One is that this system considers commercial banks as service providers, instead of "money lenders" (in the conventional system) or "investment-partners" (in the Islamic system). The book presents a general model of commercial bank lending process, and interest-free banking is derived as a sub-model. The conventional banking is seen as an inflation-free sub-model of the general model. These departures enable one to eliminate 'riba' from the system compatible with the conventional one. In turn, this compatibility makes the new system easy to understand and to explain, and therefore easy to implement in all countries. The author goes on to explain this system by quoting an example. He says the Islamic banking system cannot pay any interest to its depositors; neither can it demand or receive any interest from the borrowers. But the lender is entitled to the return of his capital in full as this happens to be a Qur'anic injunction. But Islamic banking as practiced today does not provide capital guarantee in all its deposit accounts. However, there are no objections to paying zero interest on deposits. Thus, by paying zero interest and guaranteeing capital, the proposed system satisfies both the riba-prohibition rule of Islam and the capital guarantee requirement of conventional Banking Acts. According to the author, the philosophical re-orientation, procedural adjustments and the re-training of staff required for the change over from the conventional to the proposed system are also minimal. More importantly, the new approach makes commercial banking transparent and interest-free. The proposed system tries as much as possible to avoid pitfalls encountered by Islamic banking as practiced today and successfully addresses many issues currently being debated. It offers sufficient flexibility to be tailored to suit a variety of situations. It is compatible with the conventional system and uses many of the latter's tried and proved methods and procedures, thus avoiding as much as possible any clash with the existing systems, and escaping re-inventing the wheel. The book was written to address primarily the needs and concerns of Muslims today in all parts of the world. As such, it deserves serious consideration by the Muslim community as a whole, as well as by others interested in a transparent system of banking and a responsible form of financing. Title:
Islamic Banking and Finance: Another Approach Published on: 3 October 2000 |