At the beginning of the Islamic banking experience, there were only exclusive Islamic Banks, there was no such thing as “Islamic Windows” as conventional banks had yet to realize the size of the opponent that had entered the banking industry. They thought that Islamic finance was a practice based upon religious fervour that was bound to fail because it was not capable of providing a suitable alternative to conventional banking. However the stability demonstrated by the Islamic banking industry in its early stages, and its ability of providing a credible alternative [to conventional banking] – thanks to the support of the Islamic community – led to it succeeding. This resulted in Islamic banking becoming a serious contender to conventional banking.
The Islamic banking industry managed to win over a considerable portion of the marker in record time. This led to the conventional banking industry reassessing its position towards Islamic banking, attempting to emulate it by introducing [financial] tools and products that comply with Islamic Sharia law, so as not to lose its market share. However conventional banks faced a big problem, namely convincing Islamic banking clients to trust in them and their ability to genuinely implement Islamic Sharia law without manipulation or fraud. As a result of this, conventional banks established “Islamic windows” as independent departments within the banks, and appointed religious bodies to supervise their operations and authorize and inspect their financial products.
With these two steps, conventional banks gained the trust of a sizable portion of Islamic banking clients, and began to compete with exclusive Islamic banks. The number of Islamic windows within conventional banks has risen to around 350, which is close to the total number of Islamic banks. However there is still a sense of suspicion and mistrust amongst the majority of Islamic banking clients with regards to these “Islamic windows” and their Islamic products. This is an attitude that can be clearly seen in any discussion about Islamic banking products.
However in truth, this attitude is not completely unjustified, but is in fact the result of the practices and operations of such organizations [Islamic windows]. All of the [financial] products that are the subject of debate amongst Muslim scholars, and which are subject to examination and scrutiny, have been invented by Islamic Windows. This is from tawarruq, to sukuk bonds, to so-called Islamic credit cards. This is due to the weak supervision of these Islamic windows, and the lack of attention that is paid to their financial products. Supervision is the only way to guarantee that decisions taken by religious bodies are implemented correctly. Neglecting these Islamic windows suggests that their violation of Islamic Sharia decisions is systematic, rather than a mistake in implementation.
Many Islamic banking clients believe that conventional banks are involved in immoral – from an Islamic Sharia point of view – financial activity, including usury, speculating on derivatives, and financing activities that are prohibited in Islam. They believe that their money, via the Islamic windows of conventional banks, could be used to finance such activities, because the division [between the conventional bank and the Islamic window] is not a genuine and real one.
This explains the reluctance that we witness today from numerous Islamic banking clients to deal with Islamic windows and their financial products, especially when there is an exclusive Islamic bank available as an alternative. The British “Independent” newspaper published a special report on this issue after giant British banks like HSBC and Lloyds TSB began to lose clients to Islamic banks in the UK. Due to my own interest in this industry, I can confirm that this is an attitude that does exist amongst Islamic banking clients in the UK; however this is not confined to Great Britain alone, but rather is a general attitude amongst Islamic banking clients. However there are some who might not agree with this, and therefore I think that the General Council for Islamic Banks and Financial Institutions [CIBAFI] should carry out a survey on this issue in collaboration with a research institute that conducts polls. This is in order to get to the truth, and convince conventional financial institutes to re-evaluate their experience with Islamic banking and rectify their mistakes. It would not be in the interests of either the Islamic banking industry or conventional banking for conventional banks to no longer compete with Islamic banks.