iqbal Malik presentation on islamic Banking in central and india

1. RENAISSANCE OF ISLAMIC BANKING & FINANCE
IN CENTRAL ASIA
AND ITS FEASIBILITY IN INDIA

2. Contents
 Factors for novelistic financial inclusion in central Asia
 Constitutional amendments for Islamic Banking inclusion
 Economic intensification by Islamic Banking in central Asia
 Inheritance of Islamic finance in India
 Implementation process
 Feasibility
 Challenges In India
 Need in India
 Q & A

3. Factors for Islamic banking in central Asia
 Revival of Islamic infrastructure (Waqaf & Zakat) abolished by the regimes of Stalin and
Lenin
 Renascence for the inclusion of Islamic economic System
 Muslim populations in Central Asia favor the promise of Quran based banking
operations over conventional methods to lend money
 Reaction for the global financial crisis, political decision makers and financial
entrepreneurs in the region were eager to develop new sources for capital .

4. Islamic Finance in central Asia
 First initiatives for Islamic banking, however, were undertaken as early as 1990 in the
republic.
 A riba-free operating US-based Bank that tried to enter the Kazakhstan market in the
1990s
 Al’baraka Kazakhstan Bank opened on January 1, 1991
 IDB in Central Asia
 Each of the Central Asian Republics has joined the IDB: Azerbaijan (1992);
Kyrgyzstan (1993); Turkmenistan (1994); Kazakhstan (1995); Tajikistan (1996); and
Uzbekistan (2003). By 1997,

5. Constitutional Amendments
 Kazakhstan, the first post-Soviet state to create a legislative foundation for developing Islamic
finance, is making far-reaching plans to expand this financing model. (Kazakh Islamic Finance
Law, 12.02.2009). Provisions such as Article 52-1 & 52-2 severely compromise the independence
of the bank’s council on the principles of Islamic finance, since the members of the council are
appointed by the bank itself.
 Kyrgyzstan modified its banking legislation to allow for Islamic banking activities. Eco-Islamic
Bank, the country’s first Islamic commercial bank, was established in 2008 with support from the
Islamic Development Bank (IDB). the bank held USD65mln in total assets. (Article II of MOU)
 National Bank of Tajikistan, drafted an legislative changes to incorporate the operations of Islamic
banking. Two Tajik banks have already introduced Islamic banking pilot projects worth
USD15mln.
 Kauther Bank in Azerbaijan functioning since 1988. but got full legislative support in 2006

6. Intensification of Islamic Banking in Central Asia
2014 Annual report

8. Inheritance of Islamic Financial Intuitions in India
 Islamic banking has been misunderstood in India as a religious charitable venture restricted to
the country‘s poverty-ridden and economically downtrodden Muslim community.
 In 19th century Interest free Anjuman Mawdud-Ul_Ikhwan , 1923 Mutual-Imdad interest free
was started at Hyderabad which collected 1 lac in 20 years and lend five to six thousand among
its one thousand Muslim and non Muslim members.
 In 1980 Jamit Islami Hind established 500 interest free societies among them only 300 are
working in the regions of Kerala, Maharashtra, Andhra Pradesh, Tamil Nadu, Karnataka, Uttar
Pradesh and Bihar
 Post 1947 also observed micro Islamic financial intuitions like Muslim Fund 1961in Deoband,
Toor Bai-tul-Maal Hydrabad, Muslim Fund Najeeb abad, Al Najeeb Mutual Fund(1990) with
75crore asset and 1.5 lac shareholders in five provinces in the country.
 Bai-tun –Nasar In Bombay was established with two limited companies Al-Falah and Itifaq
Investment having 1.5 hundred shareholders and 125 crores deposit in 1983.
 Indian Association for islamic Economics started by Abdul Azim Islahi, and Dr. Javid Ahmed
Khan supervised by Dr. Fazulr Rehman and Prof. Nejatullah Siddiqi presently working at
Kerala and Karnataka

9. Implementation Process
 Anand Sinha Committee (2006) under which Islamic Finance and Banking module was sought. 51 pages
report including the financial tools in Islamic banking was put forth.
 Mr. P. Chidambaram sought the working module of Islamic banking in secular countries. An 80 pages
document with primary sources of Islamic banking in United Kingdom, Hong Kong, Thailand, USA,
Singapore with reports of constitutional amendments.
 Six Member Anand Sinha committee concluded the proposal by saying it don’t match with the traditional
banking system therefore needs amendment in Indian Banking Regulation 1949 act or to frame separate
constitution for its implementation.
 RBI Governor Dr. Raghuram Rajan submitted the report in 2008 in which he recommended for interest
free-banking.
 According to the Section 17 of RBI Act 1934 section 24 & section 22 of the Banking Regulation Act
1949, Islamic banking is not consistent with current banking laws in India. So government which has to
determine whether they want to permit Islamic Banking and if so they have to enact a law that is
consistent with Islamic Banking”.
 Prime Minister Manmohan Singh had also asked the RBI (2010) to look into the Malaysian model of
Islamic banking while referring to the demands for experimenting with interest-free banking.

10. Dr. Subramanian Swami call Islamic Banking a
fraud and a boiled ice-cream.
I will not let Islamic Banking to implement in India.
It is against the secular fabric
In the letter, Dr. Subramanian Swami has argued
that permitting Islamic finance can be politically
and economically disastrous for the Indian
economy.
Islamic banking is violating Indian constitution, by
filing petition in Kerala High Court. Latter it
was dismissed
Political Challenge

12. Economically feasible but the banking regulation act is
obstacle .

13. Nomenclature
 Dr. Rajuram Rajan Committee
named it Interest free banking,
Hong Kong (Ethical Banking), U.K
an alternative financing, Nigeria
Banking with out interest , Turkey
Participatory banking.
 Philanthropic Economic Institution
 Recommendation 2008 for Islamic
Banking

14. Feasibility in India
The primary study of data available through
Sachar Committee report (2006) reflects that
still around 50% Muslims are financially
excluded and banking is inversely related to
concentration of Muslim Population.
India has the third largest Muslim population in
the world around 161 billion (Census 2011)
 According to Report by Grail Research, part of
US-based management consultancy Monitor
Group, India could be a significant market for
Islamic banking institutions, provided there is a
favorable change in regulatory environment and
increased awareness among Muslims and India as
a whole.

15. Religious Feasibility
2011 CENSUS
Name of
the
Religion
% to Total
Population
Hindus
Muslims
Christians
Sikhs
Buddhists
Janis
Other
religions
80.5
13.4
2.3
1.9
0.8
0.4
0.6
 The Common religious feature among all Indian Religions is
about Interest prohibition therefore it is the major gateway
for the installation of Islamic/ interest Banking in India.
 Manu Simriti (Vedic Scripture) (11:62, 8:152)
 Quran (2:275-80,3:130, 4:16130:39)
 Matthew/Luke (5:42, 25:27/6:34-35-38, 19:22-23)
 Guru Granth Sahib (Kirt-Karo/ bani Jap ji sahib)
 Tripitak is also against the philosophy of Usury
Thus it is evident that all the above religions are against
Interest on money

16. The Reserve Bank of India (RBI) data report for March 2010 indicates that banking participation in
Muslim- concentrated districts is below the national average. They lack in banking access, infrastructure
availability and low credit-deposit (CD) ratio. The results were based on an analysis of six districts, which
were selected from various states, with fifty per cent or more Muslim share in the population.

17. Constitutional Feasibility
 Since the commencement of Indian Banking Regulation Act it had been amended
various times in which amendment of 1988, 1990, 1996, 2000 and 2011 are prominent.
 Under the Indian Constitution, right to development has been recognized as a
Fundamental Right under Article 21
 Fundamental right to receive banking services with out discrimination
 34% of the people have access to formal banking services
 Approximately 500,00 out of 600,00 villages have no banks
 80% of Indians do not have insurance
 Over 40% of India's population have no savings
 80% of Muslims in urban India are willing to deposit or invest in Islamic Financial
Institutions on a profit/loss sharing basis. 67% of Muslims in urban India are willing to
borrow from Islamic Financial Institutions on a profit/loss basis.

18. Recommendations
 The creation of FDIs in central Asian sates will result in the enormous growth of equity
based assets.
 The creation of Islamic share markets will result in the circulation of wealth and puts an
end to the exploitative capitalistic economic policies.
 Central Asian states are geographically connected to Indian subcontinent therefore the
possibility of prosperous economic ties between the nations.
 Muslim trade unions affiliated with Islamic banks will also generate the welfare means.
 Indian Muslim Council for Islamic Banking and finance IMCIBF regulation
 Provision in RBI 1949 with Islamic economic Jurisprudence
 Islamic Banking (branches) network headed by Indian Islamic Bank
 Islamic Share market baked by Indian Islamic Bank
 Working Cooperative Credit Societies should function under IIB
 Last but not least there is a firm need to formulate an International Islamic monetary
fund (IIMF) to cope up the world Islamic banking system

19. Conclusion
 It is evident from above discussion that Islamic Banking is the better
alternative for the ethical Globalization and logical surplus convergence
 Islamic banking and finance as a discipline has evolved both theoretically and
empirically. It has emerged as a lively, challenging and energetic discipline of
economics.
 It is not an exaggeration to say that it may be interpreted as the dawn of the
only alternative to the existing orthodoxy in banking and finance.
 There is a prime need for the epistemological interpretation of Islamic Banking
 There is prime need of unbiased ethical and sound intellectuality in order to promote
prosecute Islamic banking and finance for the upliftment and development of the people
living under BPL

20. Iqbal Malik
PhD Research Scholar
Punjabi University Patiala
iqbalmalik11@gmail.com
&
Nazir Ul Islam
PhD Research Scholar CCAS
University of Kashmir
bhatnazirulislam@gmail.co,
‫عليكم‬ ‫والسالم‬ ‫شكرا‬