NEW MODEL: EXPERTS WEIGH ITS PROS AND CONS WHILE CRITICS SAY IT GOES AGAINST THE NATION’S SECULAR FABRIC
BY holding the first-ever meeting in India this week of its International Advisory Panel (IAP), the World Islamic Economic Forum (WIEF) Foundation promoted its agenda of “building bridges through business” in a country where it sees big potential.
Foundation chairman Tun Musa Hitam emphasised the need to “solidify the partnerships and work towards concrete initiatives based on changing trends and new opportunities in the global economic scene”.
The Malaysian-led initiative sought to establish rapport between political leaders and officials, inviting Indian Planning Commission deputy chairman Dr Montek Singh Ahluwalia, a key aide of Prime Minister Manmohan Singh, to attend the 8th WIEF meet in Johor Baru in December.
Foundation secretary-general Tan Sri Ahmad Fuzi Abdul Razak said he expected a score of Indian businessmen-delegates to be at the forum, which would discuss issues, including the promoting of private sector partnerships among a host of Muslim and non-Muslim nations.
While this is a welcome move, one of the forum’s thrust areas — the introduction of Islamic banking in India — may have to await a policy decision on a complex issue. It is part of an ongoing debate and a decision is unlikely any time soon.
Ahluwalia raised the issue at the meeting with the delegation. Ahmad Fuzi explained: “India is a non-Muslim country with a huge Muslim population. But we do not want to confine Islamic banking to Muslims. We are optimistic that India will come up with a policy decision to enable Islamic banking in the country.”
Indian Law Minister Salman Khurshid, who is also in charge of minority affairs, did not dwell on it during his address. But asked by media on the sidelines, he called it “a good idea” but admitted that it was “difficult” to fit in Islamic banking with the existing regulations, as the very concept of debt and equity was different in Islamic banking.
“Non-banking financial institutions are prevalent now and are accepted, but some ambiguities have to be addressed before they can take up Islamic finance.”
He had written to the Planning Commission and the Reserve Bank of India (RBI) on the issue and was “quite hopeful” that they would “look at the issue afresh”.
“Sooner or later, the RBI will come up with a final view. Let me say at this point of time that Islamic banking is an interesting idea, compelling idea, if you look at what France, Germany and the United Kingdom are doing. It’s an attractive idea if you look at the sovereign wealth funds of the Gulf region and the fact that we need much more money to finance our infrastructure needs.” Both Khurshid and Ahluwalia left it to the experts. The crux, however, lies in a political decision.
On March 27, Parliament was informed that Islamic banking was “not legally feasible” under RBI’s existing statutory and regulatory framework.
Minister of State for Finance Namo Narain Meena told Rajya Sabha, the upper house, that the RBI had received references from the Indian Centre for Islamic Finance for introducing interest-free banking in the country “in order to ensure inclusive growth with innovation”.
The centre cited recommendations of the Raghuram Rajan Committee that scrutinised the working of India’s banking sector.
In 2010, the government opposed before the Kerala High Court the setting up of an Islamic banking institution in that state.
The National Minorities Commission has asked the government to allow Islamic banking. Its chairman, Wajahat Habibullah, said in an NDTV debate that such a bank network could cater to many sections in need of funds, like farmers.
A large number of them have committed suicide for lack of funds or inability to repay loans and interest. Like lawyer Zafaryab Jilani, he said India could develop its own model.
But critics say it goes against India’s secular fabric. NDTV asked: “Will it open up a Pandora’s box?”
Economist and right-wing politician Subramanian Swamy called the concept of loan without interest “a fraud”. The 1947 Partition was essentially a Hindu-Muslim division. Hence, religion was best kept out of economic activity. He expressed the fear that if introduced, Islamic banking could be misused for “certain activities”. He did not elaborate.
Left-leaning N. Ram of The Hindu newspaper called the introduction of tenets of any particular faith into the economic system “backward”.
“Don’t fear the word Islamic. See how non-Muslims are being benefited,” said a senior Malaysian official at the conference.
This article was published at the New Straits Times on 7th July 2012.
Click here to view the original piece of the article.