Ground Prepared For Participatory Banking (Sept. 01, 2007)
A two-day conference kickstarts the introduction of non-exploitative and equitable procedures of banking and finance in India
New Delhi, August 31: Vice President of India Hamid Ansari said here today that "participatory banking" practices had been prevalent in the country since ancient times. Quoting the 11th century globe-trotter al-Biruni he said in India there was a revulsion against usury at that time.
Speaking at a two-day international conference on "Participatory Banking For All: A Business Proposition" he said that economic development was stratified across the world. Participatory banking, also known as Islamic banking, would address the banking and financial needs of all economic strata, he added. The conference was organised jointly by IOS and Indo-Arab Economic Cooperation Forum.
Former Deputy Prime Minister of Malaysia Anwar Ibrahim said that it was time for "an open economy and open society" like India to allow Islamic banking which would be of advantage to all Indians.
He elaborated that participatory banking was based on the prevention of usury and observation of Sharia scruples. However, he advised that Islamic banking should also incorporate the moral imperatives of environmental protection, gender justice and micro-credit which many non-Islamic financial institutions had incorporated in a remarkable way.
Chairman Indian Banks Association MBN Rao explained the basics of Islamic banking and hoped that it would prosper worldwide, including India.
IOS Chairman and President Indo-Arab Economic Cooperation Forum in his welcome address said there was no doubt that participatory banking had proven to be a successful financial experiment of post-World War II. It had found acceptance wherever it operated in different parts of world, from east to west.
He explained that western financial institutions were offering products that comply with tenets of participatory banking. Banks like Citigroup, Deutsche Bank, HSBC, Lloyds TSB, Standard Chartered Bank and UBS were actively involved.
Similarly, news from Russian banks and from Switzerland as well as China indicated a keen interest in developing participatory banking methods to serve a wider global market.
"The Institute of Objective Studies has been promoting and researching the subject of participatory or interest-free banking over the last 15 years. We have published seminal works on this subject of far-reaching importance", he added.
Former Chief Justice of India Justice AM Ahmadi said that considerations like human welfare, environmental protection and "human-friendly principles" should be part of Islamic banking, which already was based on certain ethical principles.
He pointed out that Articles 38 and 39 of the Constitution envisaged a welfare state, which was a midway house between a capitalist and a socialist system. This format, he argued, shared many features with participatory banking that was a non-exploitative way of transacting business.
Vice-chairman Rajya Sabha K Rahman Khan said that participatory banking was based on Islamic economic principles that entail justice, equity, fair play and non-exploitative relationship. He said the Quran prohibits interest and interest-based transactions. In addition to the prohibition in the Quran, Islamic jurists and economists also based the prohibition on historical, social and economic factors.
"All religions believe charging interest promotes inequity, injustice, oppression and exploitation. Interest is a reward to lender without participating in the risk of enterprise, to which it is lent. In Islamic economy, equity considerations are seen to be the motivation behind economic development".
He explained the products and the firms involved must meet the basic RBI and SEBI directives, requirements that are set in place to protect the consumer and investor. Those involved -- whether as shareholder or customer -- must understand what exactly is being offered. There will be long-term damage to the cause if unrealistic expectations are created of what can be achieved. Those providing the services must be wholly professional and competent in what they do. There can be no benefit to any one from the slightest suggestions that the probity and competence with which Sharia-compliant products are provided are in any way less stringent than those of conventional financial products.
Chairman Bayat al-Mal Investment Organisation of Kuwait Sulaiman A al-Qimlas of said that if India opened up to Islamic finance "I will put my money where my mouth is." He wondered as to why was India reluctant to introduce participatory banking, which was conceptualised by some Indian economists along with others.
IOS General Secretary and member managing committee of the conference Prof. ZM Khan proposed a vote of thanks.