Moneymanagement’s Weblog

Are we Islamic compliant?

Posted in islamic banking by moneymanagement on June 23, 2008

Islamic Banking has been a hot favourite topic in newspapers and blogs. There are Islamic banking forums being organised infact there are special management courses for Islamic banking. Hyderabad-based Institute of Islamic Banking and Finance is churning out students eyeing lucrative jobs in the Gulf region. The institute, which offers web-based courses on Islamic finance, has enrollments from about 200 students some of whom are from countries like Guyana, Tunisia and the Gulf.

Economic Times went on to say Islamic banking is a distant dream in Indiahttp://economictimes.indiatimes.com/articleshow/2172818.cms

Members of a committee constituted by the Reserve Bank of India (RBI) to examine the issue has viewed that Islamic banking cannot be offered by banks in India as well as the overseas branches of local banks under the present legal framework. Except a basic offering like current account, almost no other banking product in India can be modified to meet the conditions of Islamic banking.

Yet the debate continues…

Here are the reasons why Islamic banking can become a strong product suite.

· Islamic banking makes Muslim customers feel good. So banks could adopt it as a differentiating strategy.

· India’s poor Muslims face a real problem in accessing organised financial services, and this is the same problem that the rest of India’s poor face. Greater financial inclusion, such as no-frills-banking accounts, and higher banking outreach will fix this. The fastest way to do this is enhancing competition.

· Tweaking financial products to make them Shariah-compliant is not difficult. It however needs RBI to step in and loosen the laws.

· Besides personal finance products, there are a host of corporate products which will gain popularity.

· Islam in India is the second-most practiced religion after Hinduism. There are approximately 174 million Muslims in India (according to government census 2001), i.e 16.4% of the population.. India has the second largest population of Muslims in the world (the largest being Indonesia).

HSBC has an a special site for Islamic banking called “Amanah HSBC” http://www.hsbcamanah.com/1/2/hsbc-amanah/

In India Parsoli finance has been offering Islamic brokering services and has an Islamic Equity fund. They are also on a branch expansion spree which perhaps reinforces the market for Islamic Banking in India.

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