JEDDAH, 2 May 2006 -- International Islamic banking experts are optimistic about the prospects of setting up interest-free banks in India as they believe that it would bring about social justice and reduce the disparity between the rich and the poor. They also said new banks would pump an additional one trillion rupees of dormant Muslim funds to the market.
"All major religions including Hinduism reject interest-based financing systems and I believe that there are good prospects for interest-free banks in India," said Umar Chapra, chief researcher at the Institute of Islamic Research and Training Center of the Islamic Development Bank in Jeddah and a winner of the King Faisal International Prize.
"It will make economic system safer and healthier and better for the poor," he said in comments published by a documentary on Islamic banking.
The documentary, which was produced by Abdul Aziz V.K., a researcher in Islamic banking and director and vice principal of Al-Hayat International School in Jeddah, and directed by Saleemudheen Aluva, includes excerpts from an international seminar on Islamic banking held in New Delhi on Feb. 18-19. India's State Minister for Finance Palani Manikyam inaugurated the seminar.
"If India applies an Islamic banking system, it would become the largest economy in the world," said Mabid Ali Al-Jarhi, president of the International Association of Islamic Economics. "Interest-free banking is not a religious system. It is a better way to do business and banking."
Islamic banks are now operating in many non-Muslim countries, including Britain and the United States. "Non-Muslim Chinese are the main clients of Islamic banks in Malaysia," he said.
Mundir Kahf, another expert on the system, urged Indian economists to come up with new ideas to strengthen the interest-free banking system. He said India should have implemented the Islamic banking system 20 years ago to boost its economy.
"Islamic banking is not a substitute. It's a matter of choice," said Kahf.
Rahman Khan, deputy chairman of India's upper house of Parliament, the Rajya Sabha, said interest-free banking could play a vital role in the country's development.
"Muslims in the country will be very happy to follow the system as it runs in line with the teachings of their faith," he said, adding that India has the world's second-largest Muslim population. He said interest-free banks could attract the funds of Muslims, which are kept dormant, by offering viable Islamic financial tools.
"This will create at least two to three percent of additional savings of Muslims worth a trillion Indian rupees," Khan said while addressing the two-day seminar.
Organized by Jamaat-e-Islami, India's principal Islamic organization, and the Indian Association for Islamic Economics (IAIE), the seminar was attended by university students, researchers, businessmen and bankers.
Welcoming the guests, F.R. Faridi, chairman of the organizing committee and president of IAIE, said: "Equitable and fair distribution of wealth is the hallmark of Islamic banking."
Prime Minister Manmohan Singh had spoken highly of the Islamic banking system when he was the finance minister, Faridi pointed out. "Singh was of the opinion that if Indian Muslims want interest-free banking, efforts should be made to realize their desire," Faridi said.
Muhammad Abdul Haque Ansari, president of Jamaat-e-Islami, called upon the New Delhi government to remove all obstacles standing in the way of opening interest-free banks in the country.
"Interest-free systems seek to re-distribute resources for the benefit of the poor, instead of the richest few," said Ansari.
The Indian government has already set up a committee to study the feasibility of interest-free banks.
Abdul Aziz said the seminar was a big success.
"It was first of its kind in India's history as it brought together internationally reputable experts in Islamic banking," he said, adding that interest-free banking system can bring about total change in India's economic and social set up.
By P.K. Abdul Ghafour
© Arab News 2006
