Riyadh, Asharq Al-Awsat – At first, the motive for establishing Islamic banking was purely Shariaa related, as some businessmen and intellectuals felt they had a duty in terms of Shariaa towards their religion and nation to provide a banking alternative that bases its rules and work regulations on Islamic Shariaa. The aim was to ensure religiously lawful means for Muslim society to benefit from the banking system away from religious embarrassment. The motive was not profit, as loss was more likely at the time for several reasons such as the originality of the experiment. There was no model to build upon and there was no example to follow or products to sell. Therefore, the project was subject to trial and error until the target goal was reached.
There is no doubt that this issue is incongruous with the banking industry being based on trust and stability, especially if the experiment was carried out in a truly competitive environment in which conventional banking is deeply rooted and has established great credibility. Nevertheless, the experiment was successful and Islamic banking was able to stand on its own two feet thanks to God Almighty and to the support of its clients who strongly believed in the principles of these banks and believed that the presence and the success of these banks are evidence of the validity of Islamic Sharia for every time and place. They saw it as a way to avoid the religious embarrassment caused by dealing with conventional banks, from which many Muslims refrained. These clients did not hesitate to stand up for the Islamic banks during the crises they went through. They never lost their confidence in them during hard times and they were patient with regards to the mismanagement, slowness and technological backwardness and lack of professionalism in its services. The clients were also satisfied with the risks these banks were taking side-by-side with their founders. They used to deposit their cash in these banks as a matter of speculation whereby the client does not give the depositor any guarantees of regaining his capital as well as profit at a time when conventional banks could guarantee both.
Has Islamic banking repaid their clients for their loyalty after it achieved success and the number of Islamic banking institutions increased to 396 throughout 75 countries and handles between US $800 billion and US $1 trillion? Or has it turned its back on clients and does it see them as an obstacle hindering its progress and growth?
Islamic banking today is suffering from an identity crisis and doubts towards its credibility caused by its subordination to conventional banking and the disgraceful imitation of some of its products such as organised Tawarruq, credit cards based on debt, credit cards with high interest rates and Sukuk Musharaka based on the date of purchase. These have confused clients and they are no longer able to distinguish between the Shariaa-compliant products and the conventional ones except by their names. Consequently, they have been subject to criticism from Islamic Shariaa scholars and Fiqh institutes. This brought about deep resentment from their clients, as they had dealt with these banks based purely on religious motives in search of lawful Islamic transactions, which Islamic banks can no longer offer at present. In the eyes of many, the seal of approval from the Shariaa body is no longer enough to reassure clients that the product is Shariaa compliant after raising doubts. There is no better example than the questions that are being raised about these products on television programs or in direct meetings between clients and members of the Shariaa bodies. It would be enough to attend just one meeting to find out the extent to which clients are concerned about the religious lawfulness of such products.
Here we can say that Islamic banking has turned its back on its loyal clients who deal with it as a matter of principle regardless of profit and loss. It is thanks to God and to those clients that Islamic banking came about and became successful for clients in the grey area whose only motives are efficiency and profit. Without doubt, such behaviour is dangerous and will harm this industry in the long run after the purpose for which it was intended – to be Shariaa compliant – will no longer exist. As a result, it would lose its faithful clients who deal with it in order to be Shariaa compliant, and would not be able to compete with conventional banks in attracting clients due to the strength and professionalism of the latter.
Therefore, I call upon those in charge of Islamic banking to wake up and pay attention before these banks lose what remains of their credibility. Towards this end, they should endeavour to improve the Shariaa quality in these corporations starting with Shariaa and fatwa issuance and ending with the infrastructure to ensure such a quality. This infrastructure would include systems, policies, measures, vocational training and the diligence in striving towards developing original products rather than alternatives. Luckily, the global financial crisis has provided a golden opportunity to do this after the world has acknowledged the principles upon which this industry is based as well as the criteria governing them.