Book Name: Hindustan mai Islami mai’shyat aur maliyat- mawaneh aur mawaqeh
Author: H.Abdur Raqeeb (Gen.Sec. ICIF).
Publisher: Indian Centre for Islamic finance ICIF.
Pages: 296
Price: 300.00
Reviewed by: ATHAR SHAHBAZ WANI
The Interest-free Banking and Finance system based on Shari’ah debars its financial practices and procedures from the involvement of riba (interest) and replaces it with PLS (profit-loss sharing) mechanism, thus emphasising the juristic maxim of al-ghurm bi al-ghunm that is, profits are gained by sharing risks. With this basic requirement, the products, instruments and procedures having gharar (uncertainty) and maiser (gambling) should also be avoided. In the Geo-Economic scenario, designated primarily as Islamic economics/banking or finance, this PLS based interest-free economic system, though in its evolutionary phase, acclaimed as the genuine alternative to the conventional counterpart, has become part of the financial regulatory structure of at least 75 nations around the globe.
India, a country with a huge Muslim population, has also displayed some positive gestures of interest-free banking and financial mechanisms through the establishment of some institutions. At the academic level, various scholars have made significant attempts to discuss the emergence and highlight the prospects of interest-free banking and finance industry in India while focusing on its possible assimilation in the wider economic framework of India.
In this context, H.Abdur Raqeeb highlights the efforts of Indian Centre for Islamic Finance (ICIF) New Delhi established in 2008, dedicated towards the implementation of Alternative Banking system in India. In addition to ICIF, the approaches of the institutions like Institute of Objective Studies (IOS), Islamic Fiqh Academy India (IFA), Indian Federation of Chambers of Commerce and Industries (FICCI), Kerala State Industrial Development Corporation (KSIDC) also find place in discussion to assess the present position of Islamic economics and finance in the economic paradigm of India.
The book is divided in five chapters in which the third, fourth and fifth are completely dedicated to the issue of Islamic Banking and Finance in India. The first and second chapters are about the issue of Zakat and the general framework of Islamic economics. The importance of Zakat, its strategic role in the alleviation of poverty, and in achieving the Sustainable Development Goals (SDGs) of United Nations Organisation, UNO (2016-2025) focused to reduce the poverty, save the planet and enhance prosperity globally is also comprehensively discussed. The Islamic Economics and its different facets with reference to economic sustenance, women’s role in the economic prosperity is also discussed and light is thrown on the concept of presenting the mosque in Islam as an institution for settling the problems in the socio-economic and political paradigm.
Stressing the importance of Zakat and the Institution of Bait ul Mal, the Malaysian and South African models of Zakat as modalities in the contemporary times are given as examples (pp.31,32). To encourage the Muslim community for dynamic economic viability, the reference of Medina Market established by the beloved Prophet Muhammad (peace and blessings of Allah be to him), in the city state of Medina is projected; the said market provided alternative trading platform where Muslims excelled without the interference and monopoly of Jews and other non-Muslim communities during the Prophetic times (pp 107,108).
Moreover, in a country like India where Muslims though constitute 14.5% of total population yet living in underdeveloped financial condition (by Sachar Committee analysis and post-Sachar analysis), the institution of Zakat if acknowledged and observed could provide remedy for the upliftment of this marginalised community, in this context the Bait- u-Zakahin Kerala has been committed to the cause for the last 70 years. The Awqaf, Micro Finance and self-help groups are also important for the financial stability of the Muslim community in India, the author suggests.
The developments at the regulatory level had a strong relevance for the possibility of Islamic banking and finance in India, like the Apex finance regulatory Authority RBI, in 2005 had constituted a committee under Anand Sinha, for the study of Islamic financial instruments of Islamic banking, the said committee recommends that necessary changes in the Banking Regulation Act of 1949 and in Taxation Laws are incumbent for allowing Islamic banking in India. In 2008, the former RBI Governor Raghuram Rajan in his report on “Financial Sector Reforms” opined the importance of Islamic banking in the financial inclusion concept.
Further, the Insurance Amendment Bill 2008 presented in the Rajya Sabah on 10th December 2014 which highlights the Islamic insurance takaful concept has been discussed with a brief summary. In 2013 by the order of Ministry of Finance, RBI constituted an inter-departmental group headed by Rajesh Verma, to provide the detailed report on the efficacy of Islamic finance products, the report clearly highlighted the nature of Banking Regulation Act 1949 and its various sections and subsections which ruled out the possibility of Islamic banking in India. However, the committee suggested that the separate legislation must be passed by the Parliament for the establishment of Islamic banking in India. Further, under the present regulatory environment the Islamic window could be a viable option, the committee suggested.
It is important to note here that the Banking Regulation Act 1949, RBI Act 1934, Negotiable Instruments Act 1881 and Cooperative Societies Act 1961 govern the financial intermediaries in India. The related Indian Banking Laws do not explicitly reject Islamic Banking but some provisions of above mentioned Acts, particularly of Banking Regulation Act 1949, directly confront with the foundational philosophy of Islamic Banking and Finance.
The regulatory issues of RBI regarding Islamic Banking remained the main hindrance in the establishment of Islamic Banks in India, but Non-banking financial institutions (NBFIs) adhered to Shari’ah Guidelines since Independence like, the Patni Co-Operative Credit Society Ltd. in Surat and Muslim Fund established in the first half of the 20th century, particularly in 30s and 40s running on Islamic Investment principles in India. The NBFIs are not interest-free banks, but are Islamic Financial institutions registered under Reserve Bank Directives for NBFIs (RBI) Amendment Act 1997.
[ATHAR SHAHBAZ WANI is a research scholar, Dept. of Islamic Studies, IUST Awantipora; [email protected]]