ISLAMIC FINANCE
By Suhail Zubairi
Markazi Maktaba Islami Publishers,
D-307 Abul Fazl Enclave, Jamia Nagar,
New Delhi – 110 025 INDIA
December 2009
Pages: 220
Price: Rs. 150
Reviewed by DR. WAQUAR ANWAR
A book by Zuhail Zubairi is a welcome addition to the literature on Islamic Finance. What makes it special is that the author is a qualified banker and properly conversant with the intricacies of Shari’ah principles. Further he has first hand exposure of both conventional and Islamic banking and finance at fairly senior levels. Besides, he is a good columnist on the subject and the introduction of the book rightly says that his writings are ‘marked by clarity of thought and lucidity of expression.’ As the Chief Executive Officer and Head of Shari’ah Coordination Department of Dubai Islamic Bank the writer has acquired first hand experience of the Middle Eastern market attained mainly in Large Corporate Lending, Risk Management and Syndication.
Hence, the book, in addition to delineating the theories of Islamic banking and finance, describes the real life problems that are encountered in application of these theories and the manner in which the issues are (and can be) resolved.
The principal area of differences between Islamic financing institutions and its ‘cousin’ conventional banks is that the former entail ownership risks and responsibilities that are non-existent in the case of lending by a conventional financing institution. The author has a point when he asserts that Shari’ah offers endless opportunities to create financing structures that can facilitate complex transactions as compared to the conventional banking practices where little innovations have been done in its 300 years of history.
The book describes in detail role of different agencies and contracts under the Shari’ah,. Thus Murabaha, Musharka, Istithna, Mudaraba and Wakala have been described in a clear, logical and easily understandable manner. Despite simplicity of expression the subject matter covers all important practical and legal issues.
A description of sukuk, the Islamic bond, spanning on fourteen pages is a mine of information. This current buzzword of Islamic finance can be simply understood from these discussions without getting trapped in any academic jargon! Beginning with the description that ‘a sukuk takes place when a set of investors pool their wealth in accordance with the Shariah’ and the halal (clean) profits are then ‘distributed pro rata,’ the book describes different types of sukuk, their modus operandi, their comparison with the conventional bonds, and other related issues.
The author’s specific practical exposure seems to be in the field of ‘risk management.’ Other major issues touched upon in the book are the use of Islamic indices, role of Shariah supervisory boards, efforts of standardisation being done under the banner of ‘Accounting and Auditing Organisation for Islamic Financial Institutions.’
The issues discussed pertain to those rising in Middle-East background where economy is basically rentier based. One can appreciate his position of resolving issues arising in the area he is working. He has done this part of his job very effectively. The issues that will rise in a more dynamic scenario in a country like India where full fledged total production and service based economic activity is underplayed need further research and discussion. Islamic banking needs to come out of the ghetto of the Middle East where economic activity basically means purchase and sale of real estate and cars overwhelmingly on the basis of mark-up financial instruments.
The book is highly recommended for professionals, teachers and students interested in the subject. It will effectively serve as a useful handbook on Islamic finance and banking.