The gap between Theory and practice in Islamic banking

A lot of discussion was taken place on this issue. There must be some truth in this regard. We must know the degree of the claim. So far we know Islamic banking was as old as the time of spreading of Islam. But from the very beginning it was executed centrally by the caliph or Amir-ul-Muminin. He appointed al Jahabah or Governor for every region. He is the key person of the financial hub of the area. He should have perfect knowledge about Islamic Shariah. He used sakk (cheque) and suftajah (bill of exchange) as financial instrument. The use of documentation was in vogue and different payment method was practiced.

But after the fall of Islamic ruling the world was affected by the western thoughts and theories. The practice of traditional Banking was initiated at that time. It is claimed that Italy is the birthplace of modern banking. At the bank of Venice, Florence the moneylenders opened their coinshops made financial transaction. From the word `banco’ the “bank” may be derived.

In 1940’s Muslims thought that they should have a separate financial system based on Islamic shariah. In 1950 the landowners of Pakistan started locally through establishing an organization. The aim is to provide cash to poor landowners. The system was working. There were good numbers of borrowers also. But the employees of this organization started to lend the money to the organizations. The fund exhausted and at last failed due to failure of recovery. The mission was nipped is the bud.

In 1963, the second mission was started by the famous Ahmed al Naggar in Egypt. The project was set at the Mittghamr province and its surrounding 53 villages. They started it commercially that is why it can be called the origination of the modern Islamic banking. Within a span of four years of its operations it faced conflicts with traditional organizations. At last the govt. banned the system.

At that time an organization named Tabung Hazi in Malyasia started its operation. It can be called an alternative banking operation worked in some different fields. The organization started with 1281 members and at present it has 5 million members with a capital of 2 billion.

In 1971 the first Islamic bank for social cause started in Egypt, named as Nasser Social Bank. It was a govt. initiative to perform interest free banking.

In 1975, IDB was established to serve inter-government banking and also to spread Islamic banking in the Muslim countries. Following this, Dubai Islamic Bank was also established in the same year and it can be considered as the first full fledged commercial bank. In 1983, IBBL was established in our country as the first Islamic bank in Bangladesh. After the success of their endeavor a good number of Islamic banks was established in our country details of which is discussed in the chapter “Islamic banking in Bangladesh”.

As we wanted to discuss the gap between theory and practice of Islamic banking we found that at the very outset it was public banking and now a day it is also used as private banking to serve commercial and all other purpose.

The complicity arises when it is involved in providing commercial purposes. It has taken many of its tools from traditional banking after making some changes in its style and action. But these made mere difference. Both the system should fulfill at last some same purpose through different path. But it is becoming an enigma in doing this. Due to lack of proper research and development it is loosing its way day by day. This is alarming.

In order to make a way out we are in need of making proper nourishment of Islamic Shariah. We are in need of practicing it in our personal life. We should work with it further in order to set proper models, to show the mathematical analysis of our claim, to find out the real difference it makes. No  more theoretical claim. It is the high time to show ourselves. It is the high time to create proper demarcation. Our aim is to use our Islamic tools in our practical life. That is why we should be aware that whether we are polishing others’ method or we are using our own tools.

The western style of banking fails due to its failure in the guard against investment. If we act through their way we have no other alternative. We should use our basic tools like mudaraba and Musharaka inspite of using deferred style Murabaha or others.

We have enough sources to get various types of products in order to serve our purposes. But our limitations often indulge us to use easier tools to make profit though they are not prohibited. sometimes it seems to us that we are searching a short cut method to have our goals.

The gap widely created at the time of our doing commercial banking. We have enough scholars to find many ways for our purposes. But there are few people who are interested to do this hard job which requires knowledge as well as skill and dexterity.

It is true that there are gap between theory and practice and we should work to minimize this gap. We are in need of appropriate research in this field and to have proper tools with accuracy and precision ensuring both practical and spiritual purposes.