Islamic Banking

JEDDAH, 4 April 2008 — A three-day international conference on Islamic economics ended yesterday urging Islamic banks to address problems such as poverty and unemployment in Muslim countries.

The conference, hosted by King Abdulaziz University (KAU), adopted a number of important recommendations to promote Islamic economics in the world. Nearly 1,000 delegates from across the globe, including several pioneers in Islamic economics, attended the forum.

The organizers presented 19 recommendations and proposals at the concluding session based on papers presented at the event. The proposals emphasized the need to focus more on training professionals to run Islamic banks and financial institutions.

While talking about the new strategic vision for research in Islamic economics, Dr. Najatullah Siddiqui, winner of the King Faisal International Prize for Islamic Studies and author of 30 books, urged researchers to be more creative and explore new horizons rather than wasting their efforts on conventional topics.

Siddiqui, who has worked for 22 years as a professor at KAU’s Islamic Economics Research Center (IERC), called for rebuilding Islamic economics on the basis of moral values rooted in spirituality. “This is essential for making sacrifices for noble goals, disregarding vested interests,” he said.

He added that the KAU conference came at a time when capitalism had failed to address major international economic issues including poverty, inflation and unemployment. “We should present Islamic economics to the world as the best solution to its problems in a convincing manner,” he said.

The conference urged universities and research centers in Muslim countries to prioritize Islamic economics and encourage research in the field. It also called on Islamic banks and financial institutions to fund such research projects, especially on topics relating to boosting economic development and fighting poverty and unemployment.

“Studies on waqf (endowment), Zakah and public finance during the time of the Caliphs must be given importance,” it added.

Dr. Abdullah Omar Bafel, undersecretary for higher studies and scientific research at the university, presided over the concluding session. He commended speakers and other delegates for their active participation to set out a new strategy for Islamic economics that would involve the whole Ummah.

The conference called for more efforts for the development of Islamic financial engineering — based on the objectives (maqasid) of Shariah — to present new products that would meet current and future needs, said Dr. Abdullah Turkistani, director of IERC.

“We believe that Islamic teachings, if applied properly, can fight poverty and thus we can contribute to fighting world poverty,” said Dr. Abdul Raheem Saati of KAU.

Dr. Usamah Uthman, associate professor at King Fahd University of Petroleum and Minerals in Dhahran, described Islamic economics as a relatively new discipline that required more study.

“Knowledge of fiqh (jurisprudence) is essential for researchers in the field.”

He added that although Islamic banks have made remarkable progress, “many of us are not happy with its direction. Some of them have deviated from the set principles.”

Uthman was apparently referring to the present focus of Islamic banks on corporate financing to maximize profits, neglecting its original goal of social development.

Professor M.A. Mannan, founder chairman of Social Investment Bank (SIB) in Bangladesh, also emphasized that Islamic banks should give priority to fighting poverty. “They are now focusing on corporate financing, hunting for profit,” he told Arab News.

He also believed that ideal Islamic banking products could not be marketed in a corrupt society and called for the training of professionals to manage the wealth of Muslim countries. “Many Muslim businessmen invest their money in Western countries because we don’t have skilled professionals to manage them,” he said.

Attendees also stressed the importance of training a new generation of distinguished researchers in Islamic economics. “Students of Islamic economics should be given due support including scholarships and grants,” the recommendations said, adding for the need to inject new blood into research projects and that research should be translated into Arabic, English, France, Turkish, Persian and other languages.

The concluding session was lively as delegates competed with one another to make vital proposals. Women delegates were equally enthusiastic as one of them said the recommendations were more generalized without addressing specific issues.

Dr. Afaf, another woman delegate, said Islamic economics should focus on problems in the Muslim world and finance small-scale projects.

“We have hundreds of satellite channels for sports and entertainment and why don’t we launch a channel for Islamic economics,” was a question raised by one delegate. Such a channel will also help provide distance education on the subject.

Abdul Wadood Khan from Pakistan called for a concrete plan to replace interest-based banks with Islamic banks. Another delegate suggested the Saudi government allocate a small portion of its budget to promote the research of Islamic economics in the world.

“How can we achieve development and justice together,” was the topic given by a delegate to potential researchers. “This is an area where others have failed,” he added.

Many delegates called for the teaching of Islamic economics from the high school level and creating public awareness programs on the subject. They urged organizers that the recommendations should not remain in paper and called for an executive committee to translate them into action plans.

Source: Arab News

Professor M.A. Mannan, founder chairman of Social Investment Bank (SIB) in Bangladesh, yesterday urged Muslim countries and organizations to promote "cash waqf" (endowment in cash) as a new product to collect funds required for their educational, social and charitable projects.

"The main attraction of this product is that it enables every Muslim to participate in it by contributing any amount he or she can afford," Mannan told Arab News while attending the 7th International Conference on Islamic Economics at the King Abdul Aziz University.

Mannan, former chief economist at the Islamic Development Bank in Jeddah, said contributions to cash waqf could be collected through banks. "We have introduced cash waqf at SIB and have received encouraging response from the public," he said. Bank Muamalat and other Islamic banks in Indonesia have also adopted the system. "We don’t use cash waqf funds directly to finance projects. The fund will be invested in viable ventures and the returns from projects will be used to finance projects. This will help organizations to maintain funds for their projects without resorting to contributions," he explained.

Mannan said SIB had made 300 percent growth during the past 10 years. "I hope SIB would pave the way for the establishment of a world social bank in order to finance social infrastructure projects for the Ummah."

The conference was officially opened on Tuesday by acting Higher Education Minister Dr. Matlab Al-Nafeesa. He said the economic problems facing the humanity today were the results of its distancing itself from Islamic teachings and values. He hoped that the conference would open a new chapter in Islamic economics research. The minister honored eminent economists who had contributed to the development of Islamic Economics Research Center at the university.

Dr. Osama Tayyeb, president of KAU, stressed the conference’s significance in exchanging expertise and making use of research works.

Speaking to Arab News, Dr. Najatullah Siddiqui, winner of King Faisal International Prize for Islamic Studies, called for more efforts to promote Islamic endowment and Zakah systems and fight poverty in Muslim countries. Siddiqui emphasized the need for narrowing the gap between the rich and poor and reminded the wealthy of their duty toward the less fortunate. He presented a paper on "Obstacles to Research in Islamic Economics."

Dr. Mehmet Asutay, lecturer in political economy at School of Government and International Affairs, Durham University, was one of the nearly 1,000 delegates attending the conference. His school, which offers training in Islamic finance, has a pavilion at the conference along with other major players in the industry including Harvard Law School and the Islamic Development Bank.

"There is a lot of demand for our Ph.D and master degree programs in Islamic finance," Asutay told Arab News. He also disclosed the university’s plan to open a center for Islamic finance studies. "We provide short-term courses for employees of Islamic banks and other financial institutions. Last year we provided training to more than 40 people from different countries including Australia, Germany, Italy and Switzerland. Half of them were non-Muslims." Asutay said Islamic economics was making "impressive" progress over the past years. However, he emphasized the importance of developing authentic Islamic finance products to meet the needs of different societies.

"Islamic banking has to move from commercial banking to social and retail banking. It should also get involved in social issues such as environment protection." He called for concrete efforts to establish transparency.

Professor Mohamed Aslam Haneef of International Islamic University in Malaysia was one of the speakers yesterday. He called for the establishment of an international fund for research in Islamic economics. "Students of Islamic universities should become agents of change, not changed agents," Haneef said. "We should also chart a clear agenda for the future," he told the delegates who came from all over the world including the US, UK, Egypt, Pakistan, India, Indonesia, Malaysia, Australia and New Zealand.

Source