NEW DEHLI: Mrs Alima Choudhry, a graduate of Islamic Banking & Finance, Aligarh Muslim University, India, said Since the 2008 Global financial crisis and recession, Islamic finance has emerged as the best system for stabilizing economies and achieving inclusive growth.
Alima gave her views on why Islamic finance is a viable and sustainable economic system.
Compared to the capitalist and socialist economic systems, she noted that non-Interest finance or Islamic finance guarantees equity and fairness in wealth distribution, wealth protection rules/ethics, and wealth creation.
Citing Mufti Taqi Usmani (Most renowned cleric of Pakistan) , she said, “The Objective of the Islamic economy is that wealth produced in a society be equitably distributed so that it is not in the hands of a few”.
She highlighted four fundamental building blocks of Islam and Islamic finance, which are; The Quran (words of God), Sunna (Words and practices of the prophet of God,) Ijma (Intellectual and Logical Analogy), and Qiyas (Scholarly Consensus).
“The basic tenets of Islamic finance are Justice, zero interest, Asset-based or Asset-backed financing, No uncertainty, and Gharar, and it includes all faith, communities, and societies”.
On the issue of poverty, she described it as a massive problem globally, a global phenomenon, and believed economic solutions that value humanity is required. According to her, the economy is the backbone of any society, and a system that guarantees effective distribution of wealth is critical for sustainability.
Speaking on what non-interest banks should do differently in providing relatable financial products, innovative solutions, and expansion in coverage, she explained that Islamic finance has a universal model that integrates all the variables.
According to her, the Islamic economy is growing phenomenally as 1.8 billion Muslims around the globe begin to make commercial decisions driven by faith and values. She added that this would be followed by Halal food $1.8trn, Modest fashion $361bn, Halal Media and Recreation $288bn, Halal Travel $274bn, Halal pharmaceuticals $131bn, and Islamic banking in total contributes 69% or USD 1.992 trillion.
She alluded to the projections that Islamic finance will reach a market size of $3.8trillion by 2023, with increasing activities in the Halal market, Takaful, Sukuk, and other segments.
She stated by quoting World Bank and IMF that while advanced economies like the US, Euro area, and Japan are growing on average of 1.5%, emerging economies like Turkey, Pakistan, Indonesia, Malaysia, and others are projected to grow between 4-5 % in real GDP terms some cases even higher.
Speaking on Islamic and conventional banking transactions, she said the mainstream body is different with zero interest. Alima Choudry pointed out that the Islamic economy is taking care of the weak, and wealth must be distributed just and fair.
Looking at how Islamic banking/non-interest banks can leverage digital technology to improve services in 2022, she said Islamic fintech can drive the finance industry to its next phase of evolution.
By highlighting the opportunities, she said catering to the digital demography: The expansion of IFIs should focus on building out digital-only banking and capital markets, rather than more ‘brick and mortar branches to leverage the young tech-savvy and upwardly mobile Islamic finance user base.
Adopting mobile payment and P2P finance services while leveraging distributed ledger technology and crypto assets will increase operational efficiency and customer experience.
Targeting a suitable customer base using data analytics and improving the user’s experience through AI should catalyze acceptance of Islamic financial services. This will be particularly valuable in Islamic wealth management expansion.
P2p lending/trade financing: Islamic P2p and related fintech platforms are poised to facilitate cross-border trade and financing further.
Insure-tech: Takaful-tech can be leveraged to provide coverage with a low-cost premium against unforeseen adversities that may arise from the incapacitation of the family’s income earner.
Islamic finance is a source of finance from Zakat to Sadaqah, aiming to leverage solutions. We need to reorganize, re-channelize the Islamic finance idea and leverage the rich people in the society to reach the poor by using Zakat.