Yaqoubi, addressing the “Muslim Davos”

Wa'il Shihab & Khalid Hanafi, IOL Staff

ISTANBUL, September 28 (IslamOnline.net & News Agencies) – Islamic finance experts and economists urged Tuesday, September 28, Islamic banks worldwide to play a bigger role in the fight to eradicate poverty.

The experts seized the prestigious International Islamic Finance Forum (IIFF), held in Istanbul September 27-29, to raise the issue as the Islamic finance industry is accused of doing little on the matter.

Sa`eed Al-Halaq, professor of Islamic Economy in Jordon, attributed the poor performance to the fact that the Islamic banks do not offer beneficial loans (without interest) and do not play a pivotal role in addressing social ills.

Mahmoud A. El-Gamal, of Rice University in Texas, said a major contributor to the problem is that IIFF, dubbed by economists as the “Muslim Davos”, is only targeting the well-to-do.

“I see that Islamic endowments in finance could solve the problem of poverty,” El-Gamal suggested.

The Forum, organized by IIR Middle East in association with Dow Jones Indexes, is considered the benchmark event in Islamic finance and brings together around 400 participants from more than 50 countries to debate the latest issues and challenges ahead.

Sponsors include Bahrain Financial Harbour, the National Commercial Bank, Saudi Arabia, Oasis Global Management, South Africa and Ireland and HSBC Amanah, which is the global Islamic financial services division of the HSBC Group.

Hot Debates

The conference runs for three days

The issue of Tawarooq or securitization has also sparked a hot debate in the forum.

“I do agree with the last resolution of the Islamic Fiqh Academy,” Monzer Kahf—a well-known expert in Islamic finance, told IslamOnline.net on the sidelines of the three-day conference.

“Collective fatwas issued by a group of Muslim scholars or Islamic Fiqh academies or bodies outweighs individual fatwas.”

The Islamic Fiqh Academy, which is affiliated to the Islamic World League, ruled in 1998 that Tawarooq transaction is halal.

Five years later, it re-debated the issue and forbade the transaction that is run by banks, which sell a commodity to a customer with a higher price in installments and then sell the same commodity on behalf of the customer with a lower price in cash, and then gives the customer the low price, and finally requires him to pay the higher price.

Hussain Hamed Hassan, a well-known Muslim scholar and economic expert, agreed with Kahf’s point of view.

“I myself forbade this transaction in the seven banks that I am in charge of their Shari`ah supervision,” he stressed.

But he sees it permissible in case of necessity in line with the well-known tenet: “Necessities relax prohibitions”.

Nizam Yaqoubi, a Bahraini economist, struck the discordant note, arguing that Tawarooq is only reprehensible (or Makrouh).

In addition to the issue of Tawarooq, issues like Islamic concepts of Mudarabah and Murabahah were also high on the agenda. The main differences between Islamic and conventional banks have been also dealt thoroughly.

The Islamic financial industry, which began three decades ago, has made substantial growth that attracted continuous attention from investors and bankers.

Growing at an estimated 15 percent annually, the Islamic finance market is currently estimated to be worth more than 300 billion dollars with more than 200 Islamic finance institutions operating.

Hundreds of conventional banks and investment companies, some Western, have established special units to deal in products compliant with the Islamic laws of Shari’ah.