Introduction
Islamic banking offers more than financial services — it provides a moral, faith-based framework that many Muslims can feel proud of. In this post, I reflect on why I hold Islamic banking in such high regard: from the personal journey it gave me, to the values it represents, to the positive global impact it continues to have across communities and nations.
What I really like about Islamic banking
For those who are familiar with my writing, you will have realised I believe strongly in speaking out against some of the practices that exist in Islamic banking.
However, I wanted to make a few things clear, about my very positive feelings about Islamic banking.
1) On a personal level it provided me with a wonderful opportunity to embark on a career that is consistent with my faith
I was working in a conventional bank before I specialised in Islamic banking. I was young, materialistic, and just trying to make as much money as I can. I was working on the trading floor, working closely with structuring and pricing structured derivatives. This really is close to as haram (or impermissible) as you can get. And I did not really care.
However, after some years, I became more aware of the conflicts of this work with my faith, and, over time, I felt more troubled. I made my mind up to leave banking, and move into a very safe field that had nothing to do with banking and finance. Yet, after a very long time spent looking for an opening in Islamic banking in London (remember, at this time, the number of positions in Islamic banking were probably in single digits), I was very fortunate to be given a break. From there, I did not look back. With hindsight, this favour from my Creator was one of the best things to happen in my professional life.
2) It provides a banner around which Muslims can flock and feel some pride
In a modern financial system that appears to be falling apart at the seams, and where we can see, daily, the consequences of debt, interest, and the general capitalist financial system, it really is a breath of fresh air to realise that our faith provides principles that stand in stark contrast to the causes of so much pain and despair in our world today.
Rightly, Muslims feel proud of this. It is no exaggeration to say, in these times when being a Muslim can be a source of some confusion and doubt to many, that Islamic banking is a banner which points out to the world that here is something we are doing that is very right.
3) It is almost impossible to speak about Islamic banking and hear someone being critical of the rules and principles.
Interest forbidden? A lot of non-Muslims will agree with you, and most of those that do not, may well be employed in a job or industry that relies on debt and interest to flourish.
Gambling forbidden? “Of course”, people say, “this makes sense”.
Transparency and justice in all dealings? – this is self evident
No speculation, no coercion, no harming of the environment? – ditto.
In my view, these views are so universal that they will find general agreement. To me these are not so much “Islamic” principles, but rules based on common sense and a recognition of what is good for us as people, as communities, the world around us.
4) We have seen a very large industry being built around Islamic banking
These things do not just happen. It means that governments have made a choice to support and promote it, it means that institutions and wealthy investors have injected many billions of dollars in establish these banks.
And then, we have seen Muslims, in great numbers, flocking to the industry to become clients, customers and participants.
This shows two things:
First, there is a great will to try to implement the requirements of our faith amongst governments, investors and the corporate world
Second, there is a great will amongst us – normal, average Muslims to partake in a system that is providing in an opportunity to avoid the ills of Riba and debt, and to act in a manner consistent with our faith.
5) It provides real benefits to less developed countries
For example, in Nigeria, the establishment of Islamic banking has provided real benefits. It has enabled the issuance of Sukuk (an Islamic version of a bond) that has encouraged foreign investors to inject capital into Nigeria. These funds are utilised to support the development of infrastructure in Nigeria. This is simply something that would not have been possible without Islamic banking. And this is repeated in many or all less-developed countries that introduce Islamic banking.
6) We have institutions that really care
Ok, so I would hesitate putting most Islamic banks into this category – however there is one clear, and admirable exception.
The Islamic Development Bank is worthy of our respect and admiration. This applies to the other entities associated with the IDB, including ITFC (Islamic Trade Finance Corporation), and ICIEC (The Islamic Corporation for the Insurance of Investment and Export Credit).
Now, they do not operate like normal commercial entities, which operate for the benefit of the owners and shareholders. These entities operate for the general benefit if its members, that is true. However, its members are Muslim countries (or countries with Muslim populations).
As such, some of the work being done here is really worth researching. IDB has recently discussed the issuance of a Sukuk to help alleviate the impact of cholera (One Wash Sukuk).
ITFC has created really innovative structures for trade finance that helps coffee farmers, agriculture and other real people in less developed countries.
Of course, they execute transactions that are commercial, they are not a charitable organisation as such. However, their focus on communities, Muslims, and the disadvantaged is one of the best examples of an excellent application of Islamic banking that I have ever come across.
7) We have made people recognise that Islamic banking is not a poor cousin anymore.
Even though Islamic banking assets are only around 1% of global financial assets, we have to remember that we still have around $3 trillion in assets. This is quite a lot. When I first started to work in this sector, the total was under $200bn. This shows the progress we have made.
International (conventional) banks will know about Islamic banking, and the largest ones are active in it. The same applies to law firms – the large law firms have established Islamic finance teams, and they are very knowledgeable and skilled. What has surprised me, here in the UK, is that even the smaller and local law firms are knowledgeable about Islamic banking. This is a wonderful development.
Islamic banking is no longer exclusive to the powerhouse regions of the Gulf and Malaysia. Islamic banking has expanded to all the continents, and is making great strides in Africa and Asia. It is being mentioned with increasing frequency across Europe, and, of course, London is a very significant support of it.
And it carries, along with this expansion, a very attractive message of banking with moral values. This is powerful.
These are the main aspects of Islamic banking that remind me of the powerful hold it has over me. They remind me why I made the decision to devote my career to this. They remind me, every single day, that my faith is not just a matter of prayer and worship – it extends to the commercial world that I live in, and work in. I am allowed to learn, research, teach, write and advise about Islamic banking on a daily basis. This is a blessing that I could never have imagined.
In a world where each of us tries, (I presume) to find some area where they can combine their work and passion – it has put me in a position where I know a lot about banking, finance, economics, money – and I want, desperately, to put all of this to use to support Islamic banking and finance.
To conclude, I must add a note of caution.
We can not simple recount the undeniable benefits of these aspects. We have to identify the fact that, once we state that we are acting in accordance with our faith, and once we then use this to develop practices where institutions are making profit from Muslims, then we must ensure that the industry is aware of the huge responsibility of trust that it has taken on.
We must ensure they are aware that when they practice Islamic banking, when they speak about it, when they market it, when they go to conferences and wax lyrically about it, when they go on TV and say how wonderful everything is – at the same time, they MUST respect the obligation this gives them.
They are acting in the name of Islamic. And they are acting commercially. They are demanding from Muslims that we trust them to speak and act in our name. And largely, we do give that trust.
But that trust comes at a price. It brings responsibility on those that ask it of us. And we must not give our trust blindly. We must ask hard questions.
They speak in the name of all of us. It is our duty to challenge.