Islamic Finance Should be Strengthened to Help Reduce Poverty in Muslim World
Due to the growth of the Muslim population in Western countries, the field of Islamic financing is one of the economic sectors that is receiving attention by economic systems of these states. Contrary to popular belief, Muslims are not the only customers of the services of banks and financial institutions operating under Islamic law, but some non-Muslims also welcome the use of Islamic financing services for reasons such as the morality of Islamic investment.
Professor Muhammed-Shahid Ebrahim holds a Doctorate in Business Administration from Southern Illinois University, an MBA from the University of Wisconsin and an MSE from the University of Pennsylvania.
His research is focused on financial development. This involves studying asset pricing and financial contracting, as applied to Islamic banking and finance, corporate finance and real estate finance. Prior to joining Durham, he held the position as a Professor of Islamic banking and finance at the Bangor Business School and has previously held roles as a financial analyst/planner with the United Bank of Kuwait and IDS-American Express. Professor Ebrahim was a Research Fellow at the Oxford Centre for Islamic Studies and Harvard University Islamic Finance Program.
IQNA: Contrary to expectations, Islamic finance is growing in Europe and the United States, where Muslims are a minority. What do you think is the reason for welcoming this financial system?
Ebrahim: Islamic finance is growing because of the transparency (lack of gharar) and protection of property rights in the West. The Muslim immigrants are quite religious.
The above is in contrast to the Muslim countries where materialism is rife. The other problem in the Muslim world is the lack of protection of property rights as we have autocracies (similar to the illegal Ummayad regime). This is despite the Qur'ān and the Sunnah’s emphasis on property rights.
IQNA: Why do non-Muslims also use Islamic finance?
Ebrahim: We share the same prophets with the people of the book and there are some who are disenchanted with the ‘ribawi’ finance at the retail level.
It should be noted that in Western capital markets, one can get away from ribā by investing in ‘halal’ equities.
IQNA: What do you think is the biggest positive feature of Islamic financing?
Ebrahim: My personal view is that Islamic finance should be strengthened to help reduce poverty in the Muslim world. This is its most important feature. However, the ijtihad by our esteemed ‘Ulema has not reached the level to help financial exclusion and help our poor attain their well-deserved dignity.
IQNA: Indonesia and Malaysia have somehow become the world's leading Islamic financiers. What is the reason for this large investment in this field in these two countries?
Ebrahim: I respectfully disagree with you on this respect. The fraction of assets held in the ‘Islamic’ financial system in Malaysia versus Indonesia is quite different. It is higher in Malaysia as the ‘Ulema are involved in a lot of ‘hiyal.’ This is in violation of the Maqasid of the Shariah (Objectives of the Islamic Law).
Indonesia is more conservative than Malaysia and the ‘Ulema there do not approve ‘Inah and Tawarruq sales (a violation of the ribā injunction) (or selling of assets short – a violation of the gharar injunction).
IQNA: What is the situation of Islamic financing in your country of residence and what is your view on it?
Ebrahim: To the best of my knowledge, the only ‘Islamic’ bank we have in the UK is Al-Rayan bank.
This is owned by the Qatari’s. The mortgages they offer is termed as a decreasing Musharakah. However, it is practically difficult to offer this facility. The one offered by Al Rayan does not share the downside risk of a home with the buyer. I doubt that it is halal.
My personal view is that the Ijtihad done by our esteemed ‘Ulema is not up to date and need to be revised.
IQNA: What do you think are the biggest challenges facing the Islamic financing system in recent years?
Ebrahim: I am enthusiastic about Islamic finance but we are not there yet as the Ijtihad conducted by our esteemed 'Ulema has not been updated and is in contrast to the Maqasid Al-Shariah. I am not entusiastic of the Islamic Development Bank as the researchers there are very weak intellectually
I also doubt whether the Saudis who hold the largest share of IDB will allow the research staff to design a system different with the dominant Ribawi one.
IQNA: How do you see the future of Islamic financing in the world?
Ebrahim: Islamic finance can help the Muslim world leapfrog development if and only if the ijtihad is updated and is in accordance with the Maqasid al Shariah
The Maqasid can also free the Muslim ummah from the narrow sectarian views. and bring about peace in the UmmahThis can help in economic growth of the Muslim world.
Interview By Mohammad Hassan Goodarzi
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