Depoliticizing Islamic finance

Depoliticizing Islamic finance

ALSIR SIDAHMED Available at:

In July, the Tunisian parliament passed a law allowing the government to issue sukuk, enabling the finance ministry to raise $700 million later in 2013 and help close more than $3 billion of the budget deficit.

In the same month, Muhammad Mursi was ousted following a popular uprising against him in Egypt that was supported by the army.
During his troubled one year in office, Mursi tried to further the cause of Islamic finance by speeding up policies and procedures to allow the issuance of sukuk, enable Islamic finance companies to raise funds and reform Islamic endowments or funds.
For the time being it seems these issues are no longer a priority for the new economic and finance team as they clearly put it.
According to Finance Minister Ahmed Galal, the interim government had no problem in principle with using sukuk, but would not make them its principal instrument.

However, some analysts think that with the ouster of Mursi and his Muslim Brotherhood, the political backing for Islamic finance will no longer be there to boost support for various Islamic finance products to take roots.
This approach is wrong on at least two accounts: First, it links Islamic finance and for that matter the whole of Islam, with a specific political group.

Second, it assumes that the fact that Muslim Brothers are no longer in power will impact negatively on Islamic finance.
Regardless of the presence of the Muslim Brotherhood, Islamic finance is continuing its existence on its own out of sheer necessity and its ability to attract millions of depositors, who were keen to follow the principles of their religion in day-to-day life.
This is underlined by the fact that the volume of Islamic finance is estimated to be in the range of $1.3 trillion.

To add value, this massive amount of money is an available source of finance that is interest free. And because of this lucrative market many typical conventional Western financial institutions like Citibank, HSBC and Chase Manhattan have all Islamic finance windows to cater for the needs of some valuable customers and are able to tap a large pool of savings for a growing number of depositors who do not want to deal with conventional finance.

This demand led an explosion of Islamic finance institutions which, according to some estimates, are believed to have topped more than 2,000 from typical Islamic banking, insurance (Takaful), Islamic funds, mudaraba and sukuk.
That is why Egypt will continue to consider issuing sukuk as planned to raise some money even if not the $10 billion targeted by Mursi’s government.
The stalled talks with the International Monetary Fund (IMF) on the much talked about the $4.8 billion will press toward tapping other possible sources of finance.

Moreover, there is still some room for Islamic finance in Egypt as its share is estimated to be in the range of 5 percent of the fiscal activity against 25 percent in the more mature Gulf markets.
Also with some 85 million population, between 10-15 percent of them using some kind of banking service, potential growth remains good both in Islamic and conventional finance.

Depoliticization of Islamic finance will help address serious issues related to the actual practice and whether these practices really honor the ultimate goal of the Shariah.

For instance, microfinance has been adopted as a tool to enable the poor make a breakthrough and change their lives for the better.
Available figures show that only between $800 million to $1 billion out of a $1.3 trillion volume of the Islamic finance industry as a whole is directed for microfinance.

And that amount is serving only 1.3 million people out of the global Muslim population of more than 1.6 billion.
In other words, only around 1 percent of available financial resources are going to only less than 1 percent beneficiaries in the whole Muslim world.
Does this mean that Islamic finance in its present format favors the rich at the expense of the poor and to what extent other modes of finance like murabaha and mudaraba are really serving the ultimate goal of Islam.

That can only be answered in a less politicized environment when criticism against a political force like the Muslim Brotherhood is not taken as criticism against Islam itself.

Zulkifli Hasan

  • P1050881
    Milan, Italy

  • Time for rebranding Islamic finance

    Time for rebranding Islamic finance

    Turkey’s ‘participation banking’ holds appeal to spread Islamic finance globally

    Available at:
    By Gaurav Ghose, Financial Features EditorPublished: 18:34 September 17, 2013

    Dubai: Discussants on Islamic finance at the ongoing SIBOS 2013 agreed that to be a truly global alternative, there is a need for it to be rebranded to appeal to a wider section of banking and financial customers worldwide.

    Can Islamic finance be international the way it is positioned and run today, asked Rushdi Siddiqui, co-founder and managing director of private equity firm Azka Capital, and he answered himself in the negative.

    While it works well in Muslim countries, though he pointed out that even there, some people of faith who believe it is not pure enough.

    The alternative, he suggested during the discussion on Monday, lies in the way Turkey has positioned it, calling it “participation banking”, which is “what the essence of Islamic finance is”. For example, he said, “when you have got not a borrower but a provider of capital working with an entrepreneur, there is a risk and that risk is being a participatory transaction. Therefore you want to do the due diligence in that transaction.”

    In a country like India, with a large Muslim population, Siddiqui said that a term such as participation banking will have a wider appeal than Islamic finance. “You can cross sell Islamic finance because the substance of it resonates to people who understands finance,” he noted. Puan Norashikin Mohamed Kassim, director of Treasury at Bank Islam, Malaysia, believes that there is merit to rebranding Islamic finance. Today in Malaysia, it appeals to not just Muslims but a substantial part of the non-Muslim population as well. “There is need to rebrand simply because it is not targeted to just Muslims but it is targeted to those who believe in the concept of Islamic financing,” she said. “You do not have to be Muslim to be a customer of Islamic finance as long as you believe that the concept of underlying the Sharia fits with your view then you will have customers.”

    Michael Bennett, head of derivatives and structured finance at World Bank, pointed to the use of Arabic words in English in Islamic finance and said whether they pose a hindrance or not to the market is an interesting question worth pursuing. “If your portfolio manager, for instance, in a conventional institution is thinking about purchasing say a sukuk, which is the Islamic equivalent to a conventional bond, not only do you have to get comfortable with that instrument, you have to convince your accounting department, you operations team, your lawyer.”
    Bennett added that though all the terms can be easily translated — whether that creates a kind of shock to the people in the conventional field who are used to terms like lease, participation, profit and not used to terms like sukuk, ijara, murabaha and whether that is actually a hindrance to the market needs to be looked into in the efforts to widen its appeal.

    Zulkifli Hasan
    Gaza, Palestine



    The World Conference on Islamic Resurgence with the theme of “Islamic Resurgence: Prospects, Challenges and the Way Forward” held in Shah Alam, Selangor, Malaysia on 7 September 2013 1 Zulkaedah 1434H expressed its appreciation to organizers, speakers, guests and participants for their contribution to the Conference.

    The speakers, guests and participants of the Conference ranging from the Muslims and Non-Muslims association, foreign embassies, Non-Governmental Organizations, administrator, da’wah entities and associations, policy makers, academia, researchers, students, and community at large discussed issues relating to the current state of Islamic resurgence in the world, the problems concerning their development, the approaches and its inherent issues.

    The World Conference on Islamic Resurgence made the following resolutions:

    1. Strengthening and establishing tarbiyah foundation as well as training institutions locally and at region and international level.
    2. Establishing Research Institution/Foundation (think-thank) focusing on both Muslim Minority Countries and Muslim Majority Countries.
    3. Initiating periodical symposium of Islamic movement/ Islamic resurgence.
    4. Producing Universal Training Manual Guide (Substantive and Procedural) for Muslim organizations.
    5. Publishing autobiography of Muslim activists and senior leaders of Muslim organizations.
    6. Developing comprehensive database on Islamic movements all over the world including Muslim intellectuals and thinkers.
    7. Institutionalizing and promoting a long term and sustainable process of constructive engagement with communities and all stakeholders in a substantive and meaningful dialogue to promote better understanding.
    8. Creating community cohesion and a sense of living through community outreach programs.
    9. Empowering the Islamic educational system including its methodological issues, teaching approaches and educational training.
    10. Addressing social and economic issues through social activism such as combating poverty, food crisis, endemic diseases, climate change and natural disasters.
    11. Promoting moderation based on a clear understanding of its root causes and different dimensions to avoid misinterpretation and targeting of innocent individuals or organizations.
    12. Coordinating speakers, guests and participants the exploration of various models of governance in relation to Western democracy, which has been proven to be in effective in addressing the issues facing the Muslim world.
    13. Developing a strong network among Muslim NGOs locally and at regional and international level.
    14. Maximizing the utilization of technology and social media networks as the medium of interaction amongst Muslim organizations and to friendly approach young generation and society at large.


    Konferen Sedunia Kebangkitan Islam yang berlangsung pada 7 september 2013/ 1 Zulkaedah 1434H di Shah Alam dengan tema “Kebangkitan Islam: Prospek, Cabaran dan Masa Depan” menzahirkan penghargaan kepada penganjur, pembentang, tetamu dan peserta di atas sumbangan mereka kepada Konferen.

    Pembentang, tetamu dan peserta Konferen yang terdiri daripada pertubuhan Muslim dan bukan Muslim, kedutaan asing, badan bukan kerajaan, pentadbir, entiti dakwah, pembuat dasar, ahli akademik, penyelidik, pelajar dan masyarakat umum telah membincangkan isu-isu berkaitan kebangkitan Islam di dunia, masalah mengenai pembangunannya, pendekatan dan isu-isu yang masih membelenggu umat Islam.

    Konferen Sedunia Kebangkitan Islam telah membuat Resolusi berikut:-

    1. Memperkukuhkan asas tarbiyah dan institusi latihan di peringkat tempatan, serantau dan antarabangsa.
    2. Menubuhkan institusi kajian (think-thank) memfokuskan minoriti Muslim di Negara Islam dan Muslim di Negara majoriti Muslim.
    3. Menganjurkan symposium berkala bertemakan gerakan Islam dan kebangkitan Islam.
    4. Menghasilkan ‘universal training manual guide’ baru untuk gerakan dan pertubuhan Islam.
    5. Menerbitkan autobiografi atau memoir aktivis dan senior gerakan Islam.
    6. Membina pengkalan data yang komperehensif tentang gerakan Islam, intelektual Muslim dan pemikir Islam seluruh dunia.
    7. Menginstitusikan dan mempromosikan dalam jangka masa panjang ‘constructive engagement’ dengan komuniti dan semua pemegang taruh dalam kaedah dialog bermakna untuk mempromosikan kefahaman yang baik tentang kebangkitan Islam.
    8. Menciptakan ‘community cohesion’ dan ‘a sense of living’ melalui program mendekati masyarakat.
    9. Mengupayakan sistem pendidikan Islam dan metodologinya, kaedah pengajaran dan latihan pendidikan.
    10. Menangani isu sosial dan ekonomi melalui aktivisme pembangunan sosial seperti memerangi kemiskinan, krisis makanan, wabak penyakit dan bencana alam.
    11. Mempromosikan konsep wasatiyah berasaskan kefahaman yang jelas terhadap puncanya dan daripada dimensi berbeza bagi mengelakkan salah faham dan pihak yang tidak bersalah menjadi sasaran sama ada individual ataupun organisasi.
    12. Mengkoordinasi di kalangan pembentang, tetamu dan peserta Konferen untuk mencari model tatakelola yang baik apabila model demokrasi barat yang mana terbukti tidak berkesan dan serasi dengan gerakan Islam dalam menangani isu dunia Islam.
    13. Membina jaringan yang kuat di kalangan NGO Islam tempatan, serantau dan peringkat antarabangsa.
    14. Memaksimakan penggunaan media sosial dan teknologi sebagai medium interaksi dikalangan organisasi Islam bagi mendekati generasi muda dan masyarakat.