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Towards alternatives in finance

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S M Wasiullah earned his MBA specializing in Finance from the prestigious Osmania University, Hyderabad. Currently he is the National Co-ordinator of Humane Economics Forum (HEF) and also works as the Financial Research Analyst in an Islamic Finance firm. He is keenly interested in the field of Islamic Economics and Finance and started studying the subject when he was yet in the early years of his college life. Based on his study and research he has been contributing research papers and articles on various issues to local and national level magazines. He can be reached at: [email protected]

1) What is your motivation behind choosing this field as field of interest (and as a career)?

Ans: I started reading Islamic Economics during my graduation in the year 2004-07. Further, when I was in my MBA in 2008-09, it was the high time of global financial meltdown, so I started a serious study of this crisis. During my study on this issue I came to know the factors of this crisis. I also got to know that where this crisis was engulfing all the industries, the Islamic finance industry remained comparatively less affected. Then I decided to study Islamic Finance with respect to its principles and features in detail. So for that reason I took this topic for my MBA project. Later I continued my study on this subject in the guidance of Islamic Finance experts and practitioners. Moreover, since a couple of years I got an opportunity to work practically in this industry.

2) You have been studying this subject since a long time and also have contributed research papers and articles. Can you please list out a few papers that you feel are important among them? 

Ans: Sure, among all my write-ups on this subject, there are three most notable research papers. They are: 1). “Islamic Finance: Developments and Opportunities in India” produced under the guidance of Dr. Shariq Nisar, as a part of my MBA curriculum.  2). “Islamic Finance in India: Prospects and Challenges”, submitted to the International Seminar on Islamic Finance in India at Kochi in 2010 (for which I got 1st prize as well) and 3). “Review of Literature on Islamic Economics and Finance” submitted to Centre for Study and Research-JIH, in 2012. All these papers were produced after an in depth study, research and analysis.

3) What is Islamic Finance all about? Can you give a brief introduction to this field for our readers?

Ans: In simple words, Islamic Finance is the financing activity carried in the light of Shariah or Islamic law. The basic and most important features of Islamic Finance are: It is free from Riba (interest), Gharar (Uncertainty), Maysir (Speculation). In addition, it avoids trade in unlawful goods and services that are directly prohibited in Islam. Further, it is based on the principle of justice and equity.

4) If prohibition of Interest is the basic feature of Islamic Finance then how the Islamic banks operates as we see today major operations of the conventional banks are based on dealing interest?

Ans: Avoiding the dealing in Interest, the Islamic banks continue their operations playing two different roles: First, as a partner where they engage with customers in a project on Profit and Loss sharing basis. And, second, as a trader where they purchase assets and bear the risk of ownership then they either sell on mark-up or lease out against rent to the customer. In addition to these the Islamic banks renders some fee-based services as well.

5) Given that the World economy has gone fragile, do you think Islamic banking can be a choice of economists in future?

Ans: Islamic Banking and Finance is the success story of modern times particularly in the global market. So we don’t need to wait for another ‘Future’ to see Islamic Finance as the alternate. A number of Financial Institutions, Research Institutions and Experts are very seriously studying this industry. We can see the news that nations around the globe are adopting Islamic Banking System every day. Hence all these aspects reflect a bright future of Islamic Finance at Global level. However, the question ‘whether it will be a choice’ depends upon many factors. But at present it has been considered one of the potential alternatives to the ailing interest based financial system.

at present the Islamic Finance industry is growing with an annual growth rate of 15%-20%.  Islamic Finance Assets hit USD 1.3 trillion, a 150% increase over last five years.

6) Do you think there is slower acceptance of this system globally in general and in India particular? If yes, what do you think is the cause?

Ans: I don’t think so that there is slower acceptance of Islamic banking and financial system around the globe. The reports published on growth and developments of Islamic Finance industry shows that this industry is expanding around the globe with a swift pace. For example at present the Islamic Finance industry is growing with an annual growth rate of 15%-20%.  Islamic Finance Assets hit USD 1.3 trillion, a 150% increase over last five years.  However, it is true that the growth and adoption is little bit slow in India but it is due to some legal, technical, policy and might be political factors.

7) What are the legal and technical hurdles you find in the promotion of Islamic banking and finance in India?

Ans:  In the current legal and regulatory context i.e. Banking Regulation Act of 1949, the main hurdles or the legal obstacles in the way of implementing Islamic banking in India are as follows:

  • Inability to accept deposits from the public based on profits, i.e., a post facto determined return,
  • Compulsion to deploy a substantial portion of the deposits raised as interest based investments with the government in the process of complying with Cash Reserve Ratio (CRR) & Statutory Liquidity Reserve (SLR) requirements,
  • Prohibition of trading, and
  • Denial of permission to invest in any significant extent in any business other than that of interest based lending and related businesses.

8) Is there any way to deal with these hurdles to promote Islamic banking and finance in India?

Ans: Yes, there can be a solution to this legal hurdle. But what it is required is that the policy makers and the Islamic Finance industry experts should come together and work-out to find it. However, there are other alternate options available within the extent of existing law through which Islamic Finance can be practiced in India.

9) Do you feel that Islamic Finance has potentials and opportunities in India?

Ans:  If I am not wrong, I see immense potential in Islamic Finance to fulfil the capital requirement of India. There is need to draw a road map on how the capital originated in this industry can be utilised for the development of India. Infrastructure Development, Real Estate, SMEs, Microfinance, Mutual Funds, etc, can be sectors where the practices of Islamic Finance can be adopted with minimum legal and technical amendments.

if viewed from its basic objectives, the Islamic Finance can serve to everyone irrespective of the cast, creed, religion, gender, region etc.

10) Is Islamic Finance only for Muslim society?

Ans:  No. Though Islamic finance practices are based on Shariah principles but they are not limited to only Muslim society. In fact, if viewed from its basic objectives, the Islamic Finance can serve to everyone irrespective of the cast, creed, religion, gender, region etc.  It depends on the society how it perceives it. If Muslims perceive it from religious aspect then let them do so. But for the communities other than the Muslims it can be perceived from the aspects of equity, transparency, ethics, profitability, etc.  The reports published recently show that a notable proportion of total Islamic banking and Finance customers in the nations such as Australia, Britain, France, Japan, Singapore, USA, etc, belongs to the communities other than Muslims. Therefore, there is no rationale to say that the communities other than Muslims in India cannot enjoy the fruits of Islamic Finance.

11) Can you list out a few important challenges facing the Islamic finance industry in India?

Ans: As the practice of Islamic in India is in its initial stage therefore a number of challenges are before this industry. Most important challenges facing this industry could be Research & Development (R&D), Legal and technical issues, Government policies, Qualitative Human Resource, Capital and Funds, Competition in the market, Moral Support, etc. Despite of all the challenges the Islamic finance has much potential and lots of opportunities in Indian market. It is doing well at global level and hope would continue in India too. This is the right time for the GOI to think seriously over the utilization of Islamic Finance industry as an alternate source for its future investment requirements.

12) What are the reputed institutions offering this course in India and abroad?

Ans:  A very few universities and institutions in India are providing the courses on Islamic Economics and Finance. In most of the institutions the minimum eligibility criteria for the students who wants to enrol for the courses is a Bachelor Degree (with any subject). Some of them are: Aligarh Muslim University, Al Jamia Al Islamia – Santapuram, B.S. Abdurahman University and many other institutions are providing the courses on Islamic Finance. The students may search for more institutions on internet.

13) Tell us about the scope of this field in India and abroad. (Or tell us about the job prospects)?

Ans: I do not appreciate the way people judge the scope of any field particularly linking it to the jobs and packages. However, I can say there are good opportunities in Islamic Finance industry for the students who want to work abroad. But when it comes to the scopes in India, I can say there are opportunities but not as much as they are available abroad.

14) You are the National Co-ordinator of Humane Economics Forum (HEF). What it is all about?

Ans: For the students who are interested in this field and want to contribute to society from the field of Economics and Finance, SIO of India initiated a national level forum naming it as Humane Economics Forum (HEF). It is a platform for the students, youth and professionals to discus and to share their thoughts, works related this field. Dr. Nejatuallah Siddiqi is the Chief Advisor of the forum whereas H. Abdur Raqeeb Sb is the National Advisor. For a smooth execution of the activities and programmes, apart from the National Co-ordinator, an Executive Board is made which consists of the members appointed from all over India by the National President, SIO of India.

15) Who can be the part of this forum?

Ans: Anyone who is the citizen of India and above the age of 18 having education in commerce, management, finance, economics, CA, CS, etc, can be a part of this group. We include the professionals irrespective of their cast, creed, religion, region and gender. However, as a formal process you need to write an email on [email protected] providing your basic information such as name, age, qualification, field of interest, place and contact details. Once the process is completed you will get a confirmation.

16) What are the programmes and activities taken up by HEF?

Ans: Generally our most of the work is research oriented. We choose some topics or economic issues or economic policies and assign our members who are interested in research to come up with their proposed solution in given time period. Some time we organise seminars, conference, get-togethers, meetings with experts etc.

17) What is your message to the Students?

Ans: At the outset I heartily welcome all the students, youth and professionals who want to take up a great task of Research & Development in this filed by joining hands (with) or becoming part of the HEF. I have a simple message for them: Big Dreams are accomplished only if they are backed by smart work, high wisdom and heavy patience.

 

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