Looking towards a new Mecca - Islamic banking

CIOL: The growth rate is nothing less than 15 to 30 per cent a year. From about 30 to 40 Islamic banks in 2005 the last three years have seen 400 financial companies registered and even more companies are now recreating financial instruments for the special genre.

Looks like Islamic Banking could be new oasis of growth in the deserts of slowdown if one goes by the prospects that Hanuman Tripathi, managing director, InfrasoftTech is banking upon.

Apart from obvious markets like Malaysia, and a big Middle East focus, there are surprisingly equal opportunities in Europe, UK, France as well, he avers.

"The trading levels have grown from $70 to 80 billion in 2005 to $300 billion in 2008 worldwide. Major countries like America and even South Africa are taking it up and India would also be looking into it with permissions expected next year," he hopes.

Islamic banking is a different species in the global financial ecosystem and draws its distinctive silhouette from the halo of ethics. As Tripathi sees it, it's a new business model emerging from people who follow Islam and its tenets, leading to certain common practices which are permissible under Shariah law and keeping firm about certain practices that are not permissible.

"The consequent banking and technology solutions are hence different from commercial banking ones. Calculations are more complex. In this genre of banking, contracts need to highlight where is the money being applied," he says.

"It's a positive way of banking with no negative trade, no speculation, no belief in interest, no investment allowed in negative industries like Alcohol, Tobacco, no lending allowed for speculative purposes." "We are targeting a top position as a supplier of Islamic Finance Solutions in the world market."

For Infrasoft Technologies that has been dealing in technology solutions to banking and financial institutions for ten years, this market segment is a big opportunity and the company would be investing in respective solutions, market geographies increasingly.

Yet, as the Institute of Islamic Banking and Insurance reckons Islamic Banking is not something entirely novel. According to this Institute, Islamic banks appeared on the world scene as active players over two decades ago, and many of the principles upon which Islamic banking is based have been commonly accepted all over the world, for centuries rather than decades.

As the Institute site further explains, the basic principle of Islamic banking is the prohibition of Riba- (Usury - or interest). "Disenchantment with the value neutral capitalist and socialist financial systems led not only Muslims but also others to look for ethical values in their financial dealings and in the West some financial organizations have opted for ethical operations.

"Islam not only prohibits dealing in interest but also in liquor, pork, gambling, pornography and anything else, which the Shariah (Islamic Law) deems Haram (unlawful). Speculation can be excluded by careful investment policy, diversification of risk and prudent management by Islamic financial institutions."