The bank began by launching its new slogan, reflecting its identity and mission statement, namely setting new standards for the Islamic banking industry. This corresponds with the characteristics of the twenty-first century, the giant leap in technology and its use, and the unprecedented progress in the field of business and management. It was this slogan that adorned the entrance of the bank that prompted a young ambitious businessman to step inside and request an appointment with those in charge of corporate funding so that he could present his promising and innovative project to them. The young man’s idea was to take advantage and utilize the palm trees that are burned every year without any benefit, which not only wastes national resources but also pollutes the environment. The young businessman believed that this creative and innovative project, along with a number of financial studies that confirmed its feasibility, would be enough to convince the bank officials to provide him with financing, especially as this was a project that was consistent with the bank’s alleged slogan. However this modern and innovative enterprise that also fulfilled the provisions of Sharia law, with respect to man’s cultivation of the land and utilizing the earth’s resources in order to serve society at large, received a frustrating and disappointing reaction from the bank officials who refused to fund it on the pretext that it was new and therefore untested, and that the bank had no history of funding projects such as this. The bank officials took only a few minutes to decide to refuse to finance this project; roughly the same amount of time they allowed the young businessman to pitch his innovative idea.
At the same time, bank officials – who refused to finance the innovative and creative project mentioned above – quickly agree to fund traditional real estate projects, as they are familiar with projects such as this, and know what is involved in them.
This bank was not innovative in the way it acted, and in fact almost all Islamic banks prefer to finance traditional projects over those based on creativity and innovation. This is why we find Islamic banks suffering an over-concentration of funding in some sectors at the expense of others, especially the real estate sector, where prices have plunged in the aftermath of the global financial crisis, and are still liable to decline further in some countries. This is something that has seriously damaged the Islamic financial industry and its institutions. A number of sukuk bonds have collapsed, and those that didn’t are in trouble, while many Islamic financial institutes have suffered losses, or at the very least experienced a drop in profits, as a result of having to deal with potential insolvencies in the real estate sector.
The Islamic banking industry’s bias towards traditional sectors, particularly real estate, together with a lack of diversification in its financing and investment instruments has negatively impacted on the speed of this industry’s recovery from the after-effects of the global financial crisis. This is unlike the conventional banking industry, where many institutions have begun to make profits once more a manner that defied expectations. Therefore, the Islamic banking industry must put aside traditionalism and pursue innovation with regards to its financial instruments and products. It should adopt and finance creative projects, for projects such as these make good profits while also being in line with the noble purposes of Islamic Sharia. Moreover, innovation and creativity suits the nature of Islamic banking instruments based on participation and risk taking, and the profits that can be earned from this, according to the provisions of Sharia law.
The Islamic banking illness of favouring traditionalism and rejecting creativity and innovation – which as mentioned earlier, is contrary to the nature of Islamic banking – is in my opinion the result of the senior management at the helm of Islamic banking institutions having traditional experiences that are unsuited to Islamic banking. This is why they resort to traditionalism in their dealings, in view of the fact that people are afraid of what they don’t understand. Moreover they lack the incentive to push for creativity and innovation, for they believe that Islamic banking is nothing more than a marketing instrument to make profit, therefore realizing the purposes and objectives of Islamic Sharia law [with regards to promoting innovation and creativity] is not on their agenda.