The $1.5t in Islamic Banking

Article by: Shafeeq Rahman
Published in Tehelka

The author examines the possibilities of an alternative banking system in India.

ISLAMIC BANKING, believed to be an interest-free, participatory and ethical banking system, has been an emerging global paradigm of the banking system since the last quarter of the twentieth century. The essential feature of Islamic banking is the prohibition of taking and giving of interest in all form of banking and financial transaction. In place of an assured return on loan amount by the interest rate in the conventional banking system, the Islamic form of financing advocates the profit-loss sharing module. Taking a risk is the only provision that entitles one to profit, if there is no risk of loss then there is no assurance of profit to the depositor or the financer. The conceptual framework of Islamic banking is mainly developed by the Islamic economists of the Indian subcontinent; in particular, the complete non-interest banking module was developed for the first time in 1969 by Nejatullah Siddiqi though the business of Islamic banking flourished in West Asian countries, Iran, Malaysia and Indonesia.

The client network is now expanding beyond the conventional Muslim countries to European and other non-Muslim territories; in the UK, it is estimated that $18.4 billion business was done by the end of 2008.

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