Islamic Finance Industry and Moral Profit

There are major challenges facing the modern Islamic jurisprudence and the institutions based on it, such as the Islamic financial institutions and other profitable institutions based on Islamic references. This challenge is represented in the ability of these institutions to survive in the market while maintaining the ethical rules that raise the slogan of this Islamic reference and after the Islamic finance industry had turned into a rising industry driven by the contraction which is still suffocating the liberal economy.

This requires the Islamic financial institutions to provide qualitative viable services to combine "The professional career and the legitimate norm" which are characterized by a reasonable risk. So, they do not guarantee interest rate, such as the usury means, nor they are of high risk such as the means of gambling.

This is possible if these institutions have a firm management that adopts the Islamic solutions, the jurisprudential body that has deep understanding of Shari`ah, and the intensive jurisprudential observation which follow-up the implementation of what has been approved by those bodies.

We should not underestimate these challenges in a time where the world today looks at those institutions after they had suffered the bad effect of credit contraction and expected that the Islamic finance industry would play a role in repairing the defects caused by liberal institutions at the economic level.

It is amazing that many voices speak aloud to seek the help of Islamic economy, which we have read many of them. The most astonishing was the article published on the seventh of March 2009, in the Vatican official newspaper, calling on banks all over the world to adopt the principles of Islamic banking; to restore confidence in the global economy.

"Loretta Napoleoni," an Italian economist and "Claudia Sigri," a strategic analyst for fixed income investment in the Italian investment bank (Abacus Bank) said: "The ethical principles upon which Islamic banking is based may deepen the relationship between banks and their customers, and makes them closer to the true spirit that should be the emblem of all financial service." (Quoted from "Economy" newspaper, Edition: 5699).

Adding to the astonishment of observers, such Catholic views came in a timely manner to refute indirectly the claims of some conservatives and right wingers in the United States to limit the spread of the Islamic finance industry.

The Islamic jurisprudence is more spacious than the people, who admire the experiences of the West, think. However, one of the problems which face the Islamic jurisprudence lies in the orientation of the Islamic finance organizations to suspicious means. It seems that one of the problems is utilitarian mentality of those who run these institutions because not all the people who lift the slogan of Islam are convinced by its principles. However, there are pioneers who believe in the Islamic model and adopt it as a way of life not only a way for collecting money.

There is another group who believe pragmatically; the idea that generates more profit is the soundest and more worthy, regardless of its morality and harmony with the Shari`ah rules. If investment in Islamic material is efficient, they will abide by the Islamic standards, and trends change to something else, they shift to another investment field because it is more meaningful and more profitable.

This does not mean that the jurisprudential and ethical standards are less efficient. Today's world has discovered that these standards are more realistic in regard of macro and micro economy, and more guaranteed than the means of liberal economy itself. The means of Islamic investment deal with real assets, not fictitious assets; such as debts, debt services, and their output money. The crisis had revealed to them that the Islamic model is fighting usurious tumors that cause many problems, including inflation. The repeated calls by Muslim Jurists that the interest rate must be zero - as advocated by a number of liberal economists as well - is one of the solution keys to these discrepancies which hit everywhere.

The matter that bleeds the hearts is: some of the governing bodies of Islamic financial institutions are still heading to unacceptable behavior and present distorted products; they are not traditionally usurious nor purely legitimate.

When these traditional products are not compatible with the Islamic model, they began to ask for Fatwas close to the traditional used model. Given that legal consultants lack for the required qualifications, such as the jurisprudential skill in transactions and to complete immunity against the management pressures or they are always busied with other business. Many distorted models of those which are described as Islamic showed up with their signatures on. If they do not trust the governing council and insist on adherence to the adopted Islamic, the financial would be more reliable to the near and the far.

The Islamic products remained for a long time adopt the easiest way which is imitating the traditional products. Some Fatwas were issued to attract the hearts and taking into account the difficult circumstances in which industry was established. Despite the easiness of this way, it does not give the Islamic finance industry a real advantage, nor does it convince others with the uniqueness of the Islamic experience. However, it leads to the same result as the traditional finance industry whether inflation and deflation.

The traditional products guarantee for the merchant the money capital plus interest, and eliminate the risk as in bonds and traditional securitization. This contradicts the Islamic model which stipulates that a merchant should bear part of the risk where profits are not guaranteed in Shari`ah. However, some Fatwas tended to abolish the risk, but by other names such as compensation for the lack of actual gains under the name of gift, donation, loan, or otherwise, which is not permissible whether it is mentioned in contracts or known by customs. This was asserted by the decision of the International Islamic Fiqh Academy in its final session held in (Jumada I 1430 AH).

The mentioned Academy has done well when it called the legislative authorities in Muslim countries to create an appropriate legal framework and appropriate legal environment that governs the process of securitization, through enacting laws guarantee securitization in its various aspects and achieve economic efficiency and legitimate credibility. Political support and legal frame working of securitization is one of the most important elements that play a vital role in the success of this industry.

Islamic jurisprudence is not fanfare in the air; it is ethical standards and material efficiency that bring about profits, but it is a fair profit that meets the requirements of the capital owners and does not prejudice the clients' funds clients. The recognition of the Vatican is a clear confirmation that this religion is a mercy for all creatures, but would pragmatists have the guts to admit that? This is what we hope for.