Understanding Islamic Finance - Doha Academy of Tertiary Studies

458 Understanding Islamic Financeof mankind as a whole. Advancement of societies in the long run depends on sharingknowledge and exchange of philosophies to choose the best of them on merit. It is forthe policymakers and the world leaders to determine how to benefit from knowledge andwisdom, from wherever it is available.In a survey of Islamic banking, the South magazine, in its issue of November, 1986,reported that:“Islamic banking, as the system is widely known, was first ridiculed in the West as a fundamentalistphenomenon, then just tolerated. Now, after careful scrutiny, it is being adopted in Western financinginstitutions and other interest-based commercial banks in the Muslim world. Islamic bankers havesurvived the credibility crisis and are no longer basking in the glory of divine revelation. After thesplendid development since then, Islamic banks and other financial institutions have become morepragmatic and scientific”. 3This was two decades back, but now the situation has enormously improved. It hasprovided good opportunities for the developed countries to tap into Muslim countries ofthe Middle East and also the Muslim minority markets. Asset-based Islamic banking thatrequires rigorous self-regulation as a part of Sharī´ah compliance and specific emphasis onethical premises is expected to strengthen the internal controls in financial institutions andpromote soundness of the financial system.If applied widely at a global level, it could be instrumental in achieving balanced growthof national and global economies due to fewer spill-over effects that lead to excessive moneyand credit creation, as per the practice currently in vogue. It is possible, if the opinion makersand the intelligentsia initiate a well-thought-out movement, to persuade the economists ofrepute, particularly those sitting in the IMF and the World Bank and the policymakersin governments, to reframe the national and global trade and finance systems on just andequitable bases.Already, a large number of influential people are talking of green finance and ethicalinvestments. The strategy has to be framed to enhance the demand of such asset-basedfinances in all parts of the world. Islamic finance is well-placed to serve this purpose becausetransparency, justice and fulfilment of social responsibilities are among its core values. It hasthe potential to become an alternative model for the global system, beneficial to all societiesand for close interaction between Muslim and non-Muslim societies. At an internationallevel, the following measures may be required:1. Increasing the number of reserve currencies in the global payments system for thepurpose of diversification, which would require not only enhancing the role of the Euroand strong currencies like those of Japan and China, but also developing other regionalor group-based reserve currencies. For example, regional currencies could be developedfor inter-regional payments in South-East Asia, the Far East, Central Asia, the MiddleEast, Africa, Latin America and others; the OIC would be the best forum to developsuch a strong and widely acceptable reserve currency acceptable on the wider scale in theworld. International financial institutions should facilitate the development of multireservecurrencies if the objective of avoiding possible turmoil in global finance and developingthe world economy on sound footings is to be achieved. For the long-term betterment,the USA should also be required to help such a move for the future of its own people and3 South, London, November, 1986.