Dr Swamy gave me this pointed reply: ‘The G.O issued by the Kerala Government explicitly states that the Islamic Bank and NBFC would be Sharia-complaint. Why then is the CPM led Kerala Government so keen? Because the Government of Kerala, through KSIDC is out to placate Muslim voters by promising an Islamic Bank, the voters that the Nandigram incident in West Bengal drove away from CPM. The CPM in Kerala does not want to meet the same fate. This shows how bogus is CPM’s commitment to what they call as ‘Secularism’. And why does the Congress not protest? Because they do not want to annoy rich Dubai based industrialists and hawala operators.
Dr Subramanian Swamy
According to the Kerala Government proposal, the Islamic Bank will not pay interest to customers, while a Shariah Board will decide what sort of investments it will make. The proposed bank would have Sharia-compliant banking products and profits made out of the investments would be distributed to the shareholders. The share capital of the proposed Islamic bank has been fixed at Rs.1,000 crore. The Kerala Finance Minister has said that non-resident Malayalees and Kerala-based businessmen like E.M. Najeeb would be involved in the project.
Muslims constitute the second largest community in Kerala, accounting for more than 24 percent of the 3.2-crore population. According to a study done by the Centre for Development Studies, 48 percent of 18.5 lakh non-resident Malayalees are Muslims. Of the total remittances of Rs.24,525 crore (about $49 million) made to the Kerala State in 2007, Muslims remitted Rs.12,158 crore (Rs.24.3 million).
There are not many standard books on Islamic Banking. The one book I have read on Islamic Banking is by A.L.M. Abdul Gafoor. His book is titled Interest-free Commercial Banking published in 1995. Let me quote his words in some detail:
‘Interest-free banking seems to be of very recent origin. The earliest references to the reorganisation of banking on the basis of profit sharing rather than interest are found in Anwar Qureshi (1946), Naiem Siddiqi (1948) and Mahmud Ahmad (1952) in the late forties, followed by a more elaborate exposition by Mawdudi in 1950 (1961).2 Muhammad Hamidullah’s 1944, 1955, 1957 and 1962 writings too should be included in this category. They have all recognised the need for commercial banks and the evil of interest in that enterprise, and have proposed a banking system based on the concept of Mudarabha - profit and loss sharing.’
‘In the next two decades interest-free banking attracted more attention, partly because of the political interest it created in Pakistan and partly because of the emergence of young Muslim economists. Works specifically devoted to this subject began to appear in this period. The first such work is that of Muhammad Uzair (1955). Another set of works emerged in the late sixties and early seventies. Abdullah al-Araby (1967), Nejatullah Siddiqi (1961, 1969), al-Najjar (1971) and Baqir al-Sadr (1961, 1974) were the main contributors.’
Early seventies saw the institutional involvement. Conference of the Finance Ministers of the Islamic Countries held in Karachi in 1970. The Egyptian study in 1972, the First International Conference on Islamic Economics in Mecca in 1976, International Economic Conference in London in 1977 were all the result of such involvement. The involvement of institutions and governments led to the application of theory to practice and resulted in the establishment of the first interest-free banks. The first private interest-free bank, the Dubai Islamic Bank, was set up in 1975 by a group of Muslim businessmen from several countries. Two more private banks were founded in 1977 under the name of Faisal Islamic Bank in Egypt and the Sudan. In the same year the Kuwaiti government set up the Kuwait Finance House.
In the ten years since the establishment of the first private commercial bank in Dubai, more than 50 interest-free banks have come into being. Though nearly all of them are in Muslim countries, there are some in Western Europe as well: in Denmark, Luxembourg , Switzerland and the UK. Many banks were established in 1983 (11) and 1984 (13). The numbers have declined considerably in the following years.
India is a secular country. The establishment of an Islamic Bank anywhere in India would run counter to the letter and spirit of the Indian Constitution. When any state wants to establish an Islamic Bank like the one that has been proposed by the Government of Kerala, the Government of India in the Home Ministry should put an immediate stop to it.
In issues involving national integrity, the Government of India ought not to remain neutral between the fire-brigade and the fire. Otherwise every state in India will choose to have an Islamic Bank with branches all over the Muslim World outside India. That would become the solid fulcrum for the networking of all Islamic Terrorist Organizations which are working round the clock for the Islamization of India and the destruction of the Secular Indian State.
To quote the words of Supna Zaidi ‘The role of religion in secular and global institutions presents unique concerns that should be scrutinized since true checks and balances are not possible where deference to religious heads is unavoidable. In the case of SCF, only Sharia scholars can decide whether a financial product is permissible (halal) or not. They are thus the only individuals who can theorize as to why or how a product can become “halal.” This removes the ability of all practitioners who are not part of the SSB from engaging in product development beyond doing what they are told to find and prevent any illegality. If questions of fraud, breach of duty, negligence, criminal liability, etc. arise over any transactions, these same individuals will nevertheless remain liable.’
In the case of Islamic Banks, no other non-Muslim authority can sit in judgement on their activities. Who is right and who decides? What administrative body or court in India will be in a position to question a Sharia-based product of an Islamic Bank? Even if transactions state Bombay or some other Indian city as the jurisdiction for dispute resolution, the courts must invariably rely on Sharia-based decisions from foreign courts for theories and interpretation. If the Indian Supreme Court offers a decision based on its own theory, who will make the decision binding on Islamic Bank since Sharia is divine, i.e., not to be superceded by any secular law?
According to Renat Bekkin, International Law Lecturer at the Moscow State Institute of International Relations (MGIMO-University), not all Muslims in Russia favour the establishment of an Islamic Bank because they see it as a triumph of form over substance, like creating an Islamic whiskey!In my view creation of an Islamic Bank will only help the champions of archaic Islam to replace capitalism and democracy with Islamic law, or Sharia. While many progressive Muslims argue and reinterpret Sharia in ways compatible with universal human rights and democracy, their position remains theoretical. In practice, Sharia remains as a symbol of archaic understanding of human relations as evidenced by Saudi Arabia, Iran and Pakistan (not withstanding partial codification).
If an Islamic Bank gets established in Kerala, then all the Muslims would withdraw all their deposits with lightning speed from all non-Islamic Banks. The worst sufferers will be all the nationalized Banks! In that event Pranab Mukherjee, our Finance Minister may be delighted to order the conversion of not only the Reserve Bank of India but all the other Banks—both nationalized and private commercial banks—into Islamic Banks.