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The current state of global Islamic finance industry | By Mazhar Iqbal

Islamic finance industry is shy to make a candid reference to Islam for the fear of being labelled as a manifestation of fundamentalism

After six decades of one-step-forward and two-steps-backward journey, the 1.3 trillion dollar global Islamic finance industry is still shy to make a candid reference to Islam or Sharia for the fear of being labelled as a manifestation of fundamental Islam.

In Pakistan- where the 98pc of government business is still based on interest-based transactions, the most influential Federal Sharia Court holds only one hearing in four years on the most important case about switching country over to Islamic finance mode.

In 2020, a renowned Islamic finance expert and scholar from Pakistan, Mufti Taqi Usmani, was named as the most influential personality among 500 Muslim leaders in the world. 

In Indonesia, also known as the most celebrated home of Islamic Finance, despite of a born again career approach in which every 15 candidates out of 50 would refuse to take job in conventional interest bearing bank, the market share of Islamic finance is still 7%.

In the UK, despite of much trumpeted government backing, the Islamic banking sector is still far from tapping the huge market. The first UK Islamic bank Al-Barakara International was opened in 1982.

Ahmad El-Najjar was the first Muslim economist who pioneered the formation of the Islamic Banking system by setting up a small Savings Bank in Egypt in 1963.

Contrary to conventional practices of mainstream banking industry, he invested on a business model that was based on profit-sharing between the bank and the investors (savers).

The business model of Ahmad El-Najjar was unconventional. He was neither charging interest nor paying it in his transactions simply because of a basic moral point.

Despite openly declaring them as un-Islamic, he considered that interest (particularly the compound interest) bearing financial solutions were against the norms of social justice.

He invested the depositors’ money mostly by engaging in trade and industry, directly or in partnership with others, and shared the profits with depositors.

The El-Najjar banking strategy, after an evolutionary process, has found ways of cooperating rather than challenging the conventional approach towards the creation of wealth by conventional and well-established lenders.

However, the trillions dollars Islamic Finance industry is still not finding a comfortable way of collaboration and partnership with capitalist world economy. 

Source: The article was first published by the author here.

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