Post By: David (Daud) Vicary (Abdullah)
Islamic Finance and the Public Good
Greater synergy needed between the Halal and the Islamic Finance Industries
In the preface to our Book, Entitled “Islamic Finance – Why It Makes Sense”, my co-author, Keon Chee, and I expressed two, equally, important objectives for writing the book.
1. First was a desire to help people understand how Islamic Finance transactions work by taking an approach based on the fact that most people do not understand how conventional transactions work , and by explaining both sets.
2. Our second and equally important objective was to help the reader to appreciate the very quintessential principle of Islamic Finance.
It is that of fairness – in all interactions with people, family, business partners, non-Muslims and the community.
In a post crisis world, much more attention to Islamic Finance has been given by the world of conventional finance in order to learn some lessons regarding the alleviation of need and the stabilization of economies.
However, there is still much work to be done.
Not only in the field of Islamic Finance, where as an industry, we must participate in projects that are for the benefit of the real economy and the Public Good, but also in aligning with the Global Halal Industry, to ensure that a homogenous view of Shariah values and benefits can be represented to the world at large.
In some ways, this is still about perception. … or rather misperceptions about Islam, Islamic Finance and Halal.
Much of the conventional world has an unclear or incorrect view as to what Islam represents and prefers to follow the diatribes of the “gutter press” because it is more convenient to do so.
Many Muslims themselves are uncertain as to the values of Islam and do not have enough ammunition at their disposal to refute the allegations and negative comments made by some of the world around them.
If only there were clearer Brand Values and Global Standards that could be communicated consistently and clearly.
Let me digress, for a moment, and highlight a situation.
Brazil is the largest exporter of Halal foodstuffs to the Muslim world and wants to protect its Global Number One status. As a result, sincere and detailed thought has been going into this in Brazil over the last couple of years. The conclusion is that the entire supply chain should be Halal. That means not just the food processing, slaughtering part, but also the capital, funding and finance part. In other words, Shariah finance should be used to finance working capital and to raise funds for capital projects. In that way, Brazil believes, that they will enhance their appeal to the Muslim World.
All of this strikes me as being eminently sensible, so long as the Muslim world actually recognizes the value of what is being done. Sadly, from a Finance perspective in the GCC, only 14% of financing raised is Shariah compliant.
There is certainly room for improvement here!
There is also, however, the question of the Halal Values with regards to ethics, cleanliness, health etc. How well are they understood?
From my point of view, NOT VERY WELL!
Some people may have some ideas regarding the slaughtering of meat products and Halal food, but beyond that I am not so sure what is really understood with regard to the world of cosmetics and other household goods.
Is it not time, therefore, to do what the Global Islamic Finance Industry has being doing for a decade or more and recognize the value of Global standards and start pushing towards them? This will help raise awareness, stimulate debate, and also give people a sense of what the values are and why they are important to all humanity.
If further alignment between the Islamic Finance and Halal industry’s is to be achieved, I am fairly certain it is going to be achieved in two areas.
- One, which I have already mentioned, is regarding Global Standards.
- The second leads on from the Brazilian example. Surely to be represented as Halal the entire process needs to be Halal.
Therefore Halal products need to be financed in a Halal way. This will both stimulate the industry to grow to the next level and also ensure that negative perceptions regarding Islam can be altered, by demonstrating that the whole process is covered end to end and the overall objectives of Shariah are being fulfilled.
There is much to do and not a moment to lose.