Islamic Banking System – the Key to Economic and social transformation of Muslim Society
The Banking system is a backbone of a country’s economy, the banks manage country’s financial networks, now with changing times the banks seem to be struggling for survival due to accumulation of huge deposits and low rates of interest further there are no takers of loans, so banks try to levey charges on number of basic services which were once non-chargeable. If banks could follow Islamic banking system they could find new lease of life.
In September 2023 Russia signed a law to introduce Islamic Banking in Four Muslim-majority regions as part of two year Pilot program namely: Chachnya, Dagestan, Ttatarstan and Bashkortostan,
What is Islamic banking system?
Islamic Banking system doesn’t charge interest on loans and interest is not paid on deposits, if such is the case how do these banks function? The answer is quite amazing. Islamic banks lend money to the eligible borrowers on profit sharing basis. The borrowers or startups share part of their profit and repay principle in convenient instalments, in real terms Islamic banks earn much higher returns compared to the interest-based banking, and the borrowers are saved from the huge burden of interest. It’s is to be noted that, the Islamic banks lend money to the borrowers on collateral security basic and after full investigation of the borrower’s business performance, sometimes the banks have to share the losses too due to unforeseen circumstances.
It’s is a boon to small traders who depend on money lenders to buy perishable and other essential commodities, and end up paying huge interest to the money lenders. The Reserve bank of India hasn’t permitted Islamic banking in India but there are some credit societies that function on Islamic banks principles, one such society is called Jan seva cooperative credit society that functions at Pachaiayappa street, triplicate Chennai.
Case study 1
Let’s say Mr. Khalid is an auto drive who pays huge interest to the financer of his auto besides principle, if he approaches an Islamic bank to purchase an auto of his own, the bank gets a new auto for him after verifying his paying capacity and other credentials. Mr. Khalid starts repaying his debt daily as he plies his auto and also he shares a small portion of his profit (till he clear his debt).
Case study 2
Let’s say Mr. Rahim an experienced vegetable merchant pays exorbitant interest along with principle to his money lender daily. If he approaches Islamic bank, the bank pays back his debt to the money lender and issue loan to him to do business, after verifying his business. Mr. Raheem pays back his loan with a small portion of his profit, in a few months he clears his debt and owns the auto too.
How Islamic Banks can help Muslim Startups and students.
We have observed how the interest burden on borrowed money from the banks and money lenders have ruined many businessmen, individuals and startups. These unfortunate incidents can be avoided if Islamic banks double up their role as a financial institution and catalyst of economic and social development.
Conclusion
Wealthy businessmen and landlords can create corpus fund and establish Islamic banks in form of cooperative society in all the districts, This will serve as economic backbone for the poor Muslim startups and the investors would also stand to benefit. Alamaan Eductional and Charitable Trust is forefront in providing education aid to the poor Muslim students, besides providing shelter to the aged people at Ashiana old age home.
Dear Bothers and Sisters your donation could turn poor Muslim students into IAS officers, executives, entrepreneurs, businessmen and future donors and Zakat givers.
Donate Generously.
May ALLAH ST bless his bounties upon you, your families and well wishers, AAMEEN.
