Middle-east Arab News Opinion | Asharq Al-awsat

The Opinions of Islamic Banking Customers | ASHARQ AL-AWSAT English Archive 2005 -2017
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Riyadh, Asharq Al-Awsat- “Do you believe that Islamic banks differ from conventional banks in terms of their transactions complying with Islamic Shariaa law?”

This is the questioned asked in a poll on the CNN Arabic website. At the time of this article going to press 1,974 people had responded to this poll; 88 percent voting “No” and 12 percent voting “Yes.” What does this incomplete result signify? What relevance does this poll have to the Islamic banking industry and those responsible for it? How should we deal with this?

Firstly I would like to point out that polls such as this are not scientific and we cannot base our views on this, rather such polls merely allow us to understand public opinion towards a specific issue. The issue here is crystal clear, and the question asked was frank and explicit, and does not require interpretation or analysis. This question was about the identity of the Islamic financial system and the principles that it follows which represent the greatest strength of this industry and the means by which it attracts its customers. The Islamic financial system is also able to wield these principles as a weapon in its competition with other financial markets as it does not accept partial solutions or weak financial tools. The Islamic financial market is changing and racing against the clock to innovate and develop its tools and products, utilizing the latest technology to reach customers, reduce costs, and recruit the best scientific and strategic minds to implement its strategic objectives.

This partial vote result clearly indicates that for the majority of people who took part in this poll there is no difference between Islamic banking and conventional banking in terms of their compliance with Islamic Shariaa law. This is due to the crisis that is currently being seen in Islamic banking as a result of the close similarity between the products and services offered by Islamic banking and conventional banking in terms of structure, pricing mechanism, and financial risk. This has caused a doctrinal dispute between Islamic scholars over the legality of such products and services, and whether they truly are compliant with Islamic Shariaa law.

This convergence between Islamic banking and conventional banking can be seen in the establishment of financial services such as “tawarruq” and other financial products such as credit cards and investment accounts as alternatives to debit accounts, and other financial products which act to weaken the Islamic financial system. This is something that I have warned of for a long time but it seems that my warnings have fallen on deaf ears and that my position towards the Islamic banking system is like the Arabic poet who wrote “I have advised them, but they will not take this advise until after it is too late.”

This poll result makes it clear to the Islamic banking industry that its customers are no longer able to distinguish between Islamic banking and conventional banking in terms of what is forbidden and permissible. This poll also makes it clear that a Shariaa institute’s seal of approval is no longer sufficient to reassure customers about the Shariaa compliance of financial products or services. Islamic banking customers believe that they have lost the benefits that originally caused them to utilize Islamic financial institutions and products, namely a clear conscience that their financial activities comply with Islamic Shariaa law. This poll also makes it clear that the methodology adopted by Islamic banking in developing products is a wrong methodology and that this has led the Islamic banking system to lose its identity and become a flunkey of the conventional banking system.

If the Islamic banking industry wishes to remain competitive it must take a different course, restore its identity, and win back the trust of its customers by caring more about quality rather than quantity. When the Islamic banking industry develops products and services, it should ensure that they comply with Islamic Shariaa law and meet the target image so that the difference between what is [religiously] financial permissible and forbidden is crystal clear. The Islamic banking industry should also avoid financial products or services that contain doctrinal disputes and rather only utilize products that enjoy consensus, according to the principles set down by the Prophet [pbuh].