Note: This is part of my answer to Ara Belleng's (UP student mastering in Islamic Finance) questions on Islamic Banking. I am not an expert in the field. This is just a 'writing out loud' answer.
The
importance of Islamic banking can be answered from multiple perspective but is
rooted on one basic principle: Maqaasid ash Shariah or the Goals of Shariah. Accordingly,
the goals of Shariah are the preservation of faith, life, lineage, intellect
and wealth. All of the injunctions of Islam can be traced to these five goals.
Broadly speaking, the importance of Islamic banking, just like any other
Islamic systems, must promote and not contradict these goals.
From
an economic perspective, the importance of Islamic banking is not different
from conventional banking. Banks serve as repository and transfer of wealth, of
nations and individuals, engage in economic activities. Had there been no
banks, we can be still carrying loads of gold coins when we purchase that house
we always dream about. However, humans are ever prone to deceit, dishonesty and
greed that beset both the ancient and modern economic transactions. Whether it
is selling rotten potatoes hidden on the bottom of the sacks or some clauses
hidden in modern buying and selling contracts, Islam prohibits Gharar or deception and uncertainty in
economic transactions. Further, Islam also prohibits Riba fueled by greed. Lastly, any transaction that leads to haram
is also forbidden. Consequently, Islamic banking aims to prevent harm and promote
benefit to the society, both Muslims and non-Muslims. In a nutshell, Islamic
banking allows Muslims to enjoy all the benefits of banking systems and engage
in modern economic transactions without going against the injunctions of the Shariah
– hence the term Shariah-compliant products. This includes personal and
business financing, and opportunity for halal
investments. This allows capital to flow, finance businesses, promote growth of
small and medium enterprises, creates jobs and contribute to overall health of the
economy.
All
these benefits may affect the social and political domains. A nation with a
healthy economy and strong middle class are probably amongst the happiest
nation with stable peace and order situation. A common man, normally just want
to put food on the table and provide a secure shelter to his family. Deny him
this basic right, many resorts to crime and other unlawful means.
Lastly,
Islamic banking may have a role in geopolitics. After World War 2, imperialism
took a new form. Instead of the ugly and bloody military domination, control of
a country and consequently its resources is done through economic control. The New
York Times best seller, The Confessions
of an Economic Hitman, revealed that First World corporations take control
of Third World countries through Riba-based
loans designed so that it can never really be paid, rendering these countries forever
indebted. Thus, any action these debtor countries impose (such as invasion of a
country) is surely not opposed, locally or internationally (e.g. UN votes) by the
indebted countries. Theoretically, Islamic financing systems may rid these
first world countries their economic weapons that led to wars and untold
sufferings in modern times. After all, it is mentioned in the Qur’an that God
called Riba as war.
