Thread by @SafdarAlam

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How to fix the problem of Islamic banking?

I write a lot about Islamic banking, both educational and critical analysis. I am often asked:

“How would you fix it?”
“What can we do about it?”

I want to address these points.

I have to admit my first reaction is that these are generally pointless questions. Let me explain why.
Ever since I discovered Islamic banking, I have been fortunate enough to devote my career to it.
I worked for large global banks, and I left that industry back in 2011, for

, for moral reasons. The same moral reasons that I entered the industry – which is my love of (true) Islamic finance and banking.
Before I decided to leave the sector, I was losing sleep over the problems in the industry.

. It is no exaggeration to say it was, and remains, a cause of the gravest concern for me – every single day of my life.
Nowadays, I enjoy teaching others about how Islamic banking works, as it is truly a fascinating topic.

Whether it is through my books, my blog, my other writing, my training workshops, teaching at University – this is a real passion of mine.
However, it is also my duty to speak about the other side of modern Islamic banking – which is the problematic side.

The idea that there is some level of controversy, or contention, around the industry has been around for some years. This relates to the idea that perhaps we try to mimic conventional banking a little too much. Or that some of the contracts we use are not transparent,

and do not really operate as they should.
The general reaction is a defensive one:
1)IB is a young sector, conventional is centuries old. We need time to develop in a better and more Islamic manner
2)There is no harm, actually, if we do mimic some conventional, because as long

long as the contracts are halal, then this is perfectly legal and halal
3)It is perfectly ok to benchmark to anything (even LIBOR or interest) as this is just a benchmark for profit, and the profit is delivered in a Shariah compliant manner, which is all that matters

4)Even if it looks similar to conventional, this is ok. If halal and haram meat have the same price, or if juice and alcohol have the same price – they are still fundamentally different. Only the price is similar, and price is not a defining factor for halal and haram

5)The legal and regulatory infrastructures do not help to support true Islamic banking. They support debt transactions, so we have to operate within the existing infrastructure

My response to all of these defensive claims is that this is all pure nonsense. Not a single one of these has any element of sincerity. They are all patently untrue.

What is true is the following:

1)Mimicking conventional is a polite way of putting it. We actively pursue and

and embrace Riba
2)98-99% of EVERYTHING Islamic banks do is priced at Riba
3)100% of all Sukuks are priced at Riba
4)We do not resort to Riba as a last resort, something to be reluctantly referred to once every other avenue is exhausted. We rush to greet Riba, and demand

demand that we bring it into our daily lives
5)Every defence of Riba above relies on the ignorance of the reader. The problem is that most of us are actually ignorant of the financial markets, products, and contracts involved.
6)This lending at Riba is NOT done for charitable

or social impact reasons. These are loans, at Riba, given to retail customers (home loans, car loans, personal loans, credit cards), corporates (corporate loans of all kinds) and so on. This is pure business, pure profit making business for the banks

7)I remember when we were proud of reaching $200bn in assets in the global sector, now it is over 10x that. That is around $1,800bn of NEW ASSETS. And around 90% or more of all of them are debt priced at interest/Riba. Does this sound like an industry that is trying to avoid

Riba? Or is it actively embracing and chasing Riba?
So, when I am asked about how to fix Islamic banking, I see this as a pointless question.
The short answer, which I do not often give, is that “Yes, actually I am doing what I can to fix some of the key problems that exist.”

But I do not like to even mention that.

Because, as I see it, this is what I hear, when people ask me that question:

Muslim : "I am kind of interested in Islamic banking, but not that interested. I kind of would like to manage my finances according to my religion, but only if

it is easy to do so. If a scholar tells me this is halal, then that is good enough for me. Why should I bring difficulty into my life if they are giving me an easy way out? If you, Safdar, criticise Islamic banking, then please tell me the solution to it. Because, unless you have

have a ready solution and I can then access it easily, without changing my life, then what you are saying is not interesting. "

The question I would like to hear is :

Muslim : "Safdar, I am quite horrified to hear to extent to which we follow Riba in the industry. How can this

this be a good thing? I am really surprised because everything is approved by scholars. How can this happen. I am really worried about what you are telling me. I am now even worried about using an Islamic bank. What can I do?”

That is a sincere question, from a sincere Muslim. One who understands the power of the sin and magnitude of Riba.

That is a question I would try my best to answer.

The problem with so much of our Ummah is that we like to serve our deen when it is easy to serve.

I include myself here.

Before we talk about how to embark on a solution to fundamentally transform the modern Islamic banking and Islamic finance sector, there are a few things that we, all of us, as Muslims can and should do.

1)Educate yourself. There is a lot of public material on Islamic banking. Admittedly, 99.9% talks about theory, but it is a great start
2)Realise that the practice is absolutely, totally, completely and wholly different. We embrace Riba, as I have told you

3)Read about this part of it – I write a lot about it, and others do too. Google it. Educate yourself
4)Appreciate the extent of the problem. It is not just an issue to be resolved somehow – it is saying that the whole practice of Islamic banking is wrong, flawed, unethical

unethical and hypocritical
5)Realise that this is done in the name of our religion. Realise that scholars are used to silence us. Scholars are also a victim of this fraud.
6)Understand that we have some great Shariah standards, the best are by AAOIFI (google them). The vast

vast majority of our Riba practice breaks these rules. Did you know that?
7)Understand that where these rules are not broken, and we still deliver Riba, these Shariah rules are just not good enough. They have been watered down to the point of being useless. This is what happens

happens when profits and money challenge true and good Shariah rules.
8)Feel some level of outrage at this
9)Feel some fear of having such a level of Riba in our lives, actively rammed down our necks by Islamic banks. Understand what our Creator and Messenger (pbuh) have told

us about Riba. Study it!
10)Lose some sleep over this
11)Then, speak to other Muslims about this and spread the word
12)Then, at this stage, start to talk about the need for a real solution, or ask if there is one
13)At this stage, I would be happy to talk with you and

and explain some things

Because, when we go straight to “What is the solution”, that tells me (most times) we have no interest in a solution. We just want easy lives with no sacrifice at all.

Islamic banking is not in the hands of the banks, the scholars, the regulators, the governments. They MUST all act according to the boundaries of our faith. And, universally, they do NOT.

Islamic banking, like Islam, is in our hands. It is US, the average Muslim,

who must be responsible for the solution. Only when we demand it, and speak out, will they listen. Make no mistake, the power for change, to avoid Riba and live our lives safely, securely, avoiding the punishment of Riba, is truly in our own hands.

Until we understand that, until we stop letting others make the difficult choices for us (the others who are making a mockery of our religion, and profiting handsomely from it, and treating Muslims like clowns), then nothing will change.

So stop asking “What is the solution?”
Ask “What is it that I can do to help bring about the solution?”
Trust me, there is so much we, all of us, can do to make the changes that are needed. I am happy to explain to you all the avenues we have open to us.

When we are ready. Not before. And we are nowhere near being ready for this, yet.

And Allah swt knows best - my intentions are sincere. May my Creator forgive my shortcomings, which are many.

When I meet my Creator, I will be asked

“Did you tell others what you know, and what you have learned?”

I want to answer positively.

Whether you listen or not, is not my problem.

Safdar Alam