Via LinkedIn : Many people possess varying impressions and interpretations of Islamic Finance and the nature of its business. One of the most common and prominent misconceptions about Islamic Banking is prohibition against non-Muslims to use Islamic financial products or own institutions offering Islamic financial services.
Islamic finance was established in 1975 with the formation of the Islamic Development Bank, modern Islamic finance is, in relative terms, at the beginning of its life cycle. However, the underlying financial principles of the industry have remained unchanged since their origin over 1,400 years ago.
“Islamic Finance is about ethics, integrity, accountability and social responsibility, it encourages business and entrepreneurship purely on profit and loss sharing basis and completely prohibits fixed incomes. Sharing of risk and returns by investors and entrepreneurs is an integral crux of Islamic finance”
Only for Muslims!
This is a big misconception, seeing as large conventional banking groups such as Citigroup, HSBC and Standard Chartered, among others, are already offering Islamic financial services and prominent entities such as GE, Nestle, Shell MDS, the International Finance Corporation and the Asian Development Bank have raised money through sukuk. This is proof that no prohibition exists in terms of the use of Islamic financial products by non-Muslims, nor are there laws stating that non-Muslims may not own institutions offering such products and services.
As for the prohibition against usury, that is, investments in unethical or immoral sectors such as alcohol, gambling and pornography, it should be noted that other major world religions including Christianity, Judaism, Buddhism and Hinduism also impose this restriction. Many non-Muslims abstain from investing in such businesses as well, whether as a matter of religious, cultural or personal principle.
Even the Vatican’s official newspaper Osservatore Romano has some nice words to say about Islamic finance. “The ethical principles on which Islamic finance is based may bring banks closer to their clients and to the true spirit which should mark every financial service.”
The Islamic banking sector is witnessing an increased number of non Muslim customers/users since the last decade. At Kuwait Finance House’s Malaysian unit, 40 percent of the depositors and 60 percent of its borrowers are non-Muslims. Not just that, In a survey conducted by independent research company, 2Europe, on behalf of Islamic Bank of Britain, in August 2013. The Bank estimates that for the period 1st December 2012 – 1st December 2013, 87% of applications for its Fixed Term Deposit Accounts were from non-Muslim customers.
Since the inception of its Islamic finance banking operations in 1998, HSBC has been a pioneer in the Sharia compliant capital markets industry. HSBC has developed particular expertise and driven innovation in the structuring and issuance of Islamic bonds (Sukuk) and is one of the largest underwriters of Sukuk globally.
“More than 20 international banks operating in the UK are working in Islamic finance. Six of these are fully Sharia compliant, more than any other country in Europe.” – UK Excellence in Islamic finance.
“It’s about respecting the interests of the different parties, avoiding taking advantage of any situation of any counterpart and putting in place fair treatment” explains Rasheed Mohammed al-Maraj, governor of the central bank of Bahrain.
An ever growing demand for transparent, sustainable and ethical investments and fund management are itself a leading cause of growth in Islamic finance sector. Islamic finance is centuries-old practice that is gaining recognition throughout the world and whose ethical nature is even drawing the interest of non-Muslims.