The Islamic finance (IF) industry today is largely untapped mainly due to the lack of understanding as to what Islamic finance is all about, not only among Muslims but amongst other faiths too. The European caught up with Founder and MD of MIT Global, Muhammed Ikram Thowfeek to discuss the industry.
Is IF for the Muslim community only?
Muhammed Ikram Thowfeek: No. Islamic finance is for everyone irrespective of colour, race, religion or ethnic group. If Islamic finance were solely for the Muslim community then we would have seen banking and finance based on other faiths and philosophies too, working to comply with their own respective scriptures.
A huge misunderstanding occurs where it is assumed IF can only be practiced and accepted in Islamic countries (in the GCC for example – The Gulf Organization for Industrial Consulting (Middle East)) – or in those countries where Muslims are the majority such as in Malaysia, Indonesia and Pakistan for example – this is absolutely not the case.
Today, Islamic finance is present and practiced in many countries where Muslims are a minority, such as in the United Kingdom, Thailand and Sri Lanka to name but a few.
Is IF a relatively new industry? It appears to be just a four-decade old industry, as of 2015.
MIT: This is not the case. IF is a centuries old practice, dating back to 1436 Hijri years. The basic principles and practices were followed centuries ago, but the modern iteration of IF is four decades old which is true.
There is an assumption that IF is growing at an annual rate of 15-20% – is this correct?
MIT: No this is not the case. That being said, it depends on whom you talk to in the industry or which research company you quote from. However, the fact is that IF is growing significantly at different annual rates in different jurisdictions.
Do global lending institutions and western bankers explore IF to structure deals?
MIT: Yes this is correct. IF is not only acknowledged by western bankers and global financial and lending institutions, the deals are also structured in accordance with Shari’ah principles.
Is IF a faith based business led by Muslims only?
MIT: IF has become a promising and lucrative business not only for Muslims but for people of other faiths as well. Those of other faiths can lead IF Institutions (IFIs), provided they understand the ‘rules-of-the-game’ and capitalise on the untapped opportunities and growth potentials of the industry.
However, for Muslims it is lucrative and if done correctly will follow the path of the Muslim faith’s core beliefs.
Like more conventional finance, does IF look at an investment or financing transaction from purely an economic and commercial perspective?
MIT: No this is not true. IF looks beyond the economic and commercial aspects of the transaction by, for example, ensuring that the moral, social, ethical and religious aspects of the transaction are upheld, in order to benefit and protect the fabric of our society (that belongs to all faiths).
Are IFIs charitable institutions?
MIT: No. IFIs are like any other promising business venture, they are established to make profits and bring benefits to all the stakeholders, whilst complying with Shari’ah Principles.
Is it true that IFIs are not up to the standards of global conventional banks?
MIT: IFIs are often criticised not due to the principles that govern the industry but occasionally because of the poor customer service they have received. This is an area in need of attention and is currently being worked on, to ensure it reaches the same level of standards as global conventional banks.
Did IF became very popular after the 2008 global financial crisis?
MIT: Yes. The IF industry has become an increasingly sought-after industry by all faiths, especially among those negatively affected by the global financial crisis, appealing to those specifically looking to IF as an alternative to the conventional banking and finance system.
About the founder
Muhammed Ikram Thowfeek is a Chartered Accountant by profession and an Islamic banker and entrepreneur by practice, with three decades of experience and exposure in the field of Islamic Finance. He is also a specialist in setting up Islamic banks and Islamic financial institutions from scratch.
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