After years long continuous pressure from Muslim groups, the Government has finally agreed and is planning to roll out a national mutual fund based on the principles of Islamic finance. It would attract investments from Muslims and potential investors from the community and channelize the fund in the welfare schemes for the minority. The move has been welcomed and seen by many as a step forward towards the process of formation and adoption of Islamic or alternate banking in India.
Last month, when Abdur Raqeeb, General Secretary of Indian Centre of Islamic Finance along with some Parliamentarians called on Union Finance Minister P Chidambaram, they were told by the Finance Minister that the Government and the Prime Minister are in favour of it and the process has already been initiated and as a result all concerned authorities and stakeholders have been asked to look into the matter at the earliest.
On 23 December, Raqeeb also presented a detailed report to Congress Vice President Rahul Gandhi and Union Minister for Minority Affairs K. Rahman Khan apart from other ministers about the viability and feasibility of the Islamic banking principles and how it can help the Indian economy and the people, especially weaker and marginalised sections and how it can boost infrastructure and welfare projects.
Zia Haq in his report in the Hindustan Times on 9 January mentioned that the larger plan is to use the funds, which will be floated by the State Bank of India, to finance minority welfare schemes by also reinvesting earnings from Wakf, or Islamic endowments of charity, usually in the form of prime real estate.
In this regard, the Ministry of Minority Affairs has asked the SBI to prepare a feasibility report and send a team to Malaysia, which runs a similar successful model. The ministry is also consulting the Reserve Bank of India. The matter will then be referred to a group of ministers (GoMs).The fund will also be utilised to finance Haj, the Muslim pilgrimage to Makkah. In 2013, as per Ernst and Young, the assets of Islamic banking tapped by global bankers including HSBC, Standard and Chartered Bank were to reach $1.8 trillion.
Abdur Raqeeb, while talking to Radiance, said the move of the Government of India to float a Shari’ah compliant mutual fund to attract investments from the Muslim community and finance Haj pilgrimage is a welcome step towards introducing an alternate interest-free finance in the banking sector of the country. This is based on the Tabung Haji, Malaysian Pilgrimage Management Fund model, which is a unique Islamic financial institution, designed as per international best corporate governance framework with the aim of mobilising savings of individuals and successfully managing investment in an Islamic way in order to fulfil the life-long desire of the individuals to perform Haj. The success of Tabung Haji is due mainly to the full support of the Malaysian Government as well as the people in that country.
This long overdue move has to be cleared by Group of Ministers in the PMO and approved by RBI. In order to make it successful, the support of the Government, as in Malaysia, and the awareness among the masses is very essential. Along with this Haj Pilgrimage Fund and the recent Shari’ah based NBFC named Cheraman Financial Services of Kerala, it is hoped that the Government of India and RBI will soon introduce interest-free finance in the banking sector as recommended by the present RBI Governor, Dr Raghuram Rajan. Sukuk, Islamic asset-based bonds for infrastructure development as well as Takaful, co-operative insurance in the insurance sector is also need of the hour.
K. Rahman Khan, who has originated this concept, believes that the capital raised from such investments would be utilised to fund minority welfare.