Besides the above mentioned major objective of Islamic banking and finance industry, there are other objectives that may lead to this major objective. The people, who involve with Islamic banking and finance industry in any sense, must know these objectives. In the scenario of the decision of Federal Shariat Court in Pakistan according to which the economic system must be free from interest till December 2027, the importance of Islamic banking and finance and its objectives is manifold.
Provision of Alternatives of Conventional Banking and Finance System
As we all know that the Islamic banking was established in front of conventional banking due to the Shariah prohibitions of some economic factors in the prevalent conventional economics and banking. Firstly, there was a need to provide effective and prudent alternatives of prevalent secular and conventional banking system to transform the banking system as the banking is the backbone of the present economic and business world and without transformation of this banking system, the dream to implement Islamic economic system cannot be achieved.
As far as the alternatives for transformation of prevalent banking system is concerned, the Shariah scholars and intellectuals of Ummah have done a great job and formulated, presented and established a viable banking system in front of conventional interest based banking system by doing continuous research and analysis and now, the Islamic banking industry is offering viable alternatives of Islamic modes of financing for conventional modes. Due to development in Islamic banking, the other financial sectors i.e. insurance, stock exchange, asset management etc. have also been encouraged to Islamic alternatives. At present, the uniform Shariah standards and regulations for Islamic banking and finance have been formulated and implemented globally and these are being adopted by different countries according to their socio-economic and regional environment. In this respect, the new standards, regulations and further improvements are also being continued for the betterment of the Islamic banking and finance industry.
Now, at this stage, Islamic banking and finance industry is almost fully sufficient in offering viable products and services and this objective has been achieved.
Enhancement of Share of Islamic Banking & Finance
At present; the Islamic banking and finance system has grown at a rapid pace and achieved a considerable share in the global banking and finance.
As far as Pakistan is concerned, the share of Islamic Banking and finance as compared to conventional banking is still very low as compared to conventional counterpart. In Pakistan, according to SBP Islamic Banking Bulletin, the market share of Islamic banking assets and deposits in the overall banking industry increased to 18.8 percent and 22.7 percent, respectively by end of June 2024. The market share of financing of Islamic banks in advances of overall banking industry recorded at 28.6 percent, while the share of investments increased to 14.5 percent by end of June 2024.
All the concerns and stakeholders, belong to Islamic banking and finance industry, must attract the customers towards Islamic banking and finance by introducing suitable Islamic financial products and services in an effective manner.
Public Awareness
Besides offering viable and competitive Islamic financial products, there is a need to create effective awareness about Islamic banking. In this way; the concept, philosophy, reality and need of Islamic Banking must be known to the customers and the public.
Alhamdulillah, the Islamic banking and finance industry created awareness among business community and individuals regarding difference between Islamic and conventional economic thoughts to the very much extent and the people have known very much regarding need of Islamic banking and finance from the religious and economic point of view but still, there is a need of continuous strive for making awareness to every sector of the society and struggle for making mindset of the society in this respect.
Although the awareness is being disseminated through seminars, conferences, courses, trainings etc., it is the undeniable fact that the Islamic banking branches are the main source of information and awareness in this respect. As Islamic Banking is relatively new field as compared to conventional banking; mostly people, that are new to Islamic banking, would like to know the difference between these two systems in absolute and satisfactory manner. It must be kept in mind that the conventional and Islamic banking are absolutely different in nature. Therefore, it is mandatory for Islamic banking staff to equip themselves with the adequate knowledge with respect to the philosophy, principles and fundamentals of Islamic banking and finance so that they can satisfy the customer and attract the customer to Islamic banking in an adequate manner.
Strategy to Achieve Islamic Welfare Economic System
To move towards the biggest objective; at this moment when the Islamic banking and finance industry is being recognized across the world, we must think about the strategy to achieve Islamic economic system. Although the Islamic banking and finance industry is offering all the alternatives of conventional banking and finance industry but to establish the Islamic economic system, the Islamic banking and finance industry must offer and implement ideal partnership modes i.e. Mudaraba and Musharaka in the real Shariah essence. These modes are Shariah driven modes rather than alternatives. These real financial modes can bring revolution in the socio-economic scenario and also support to meet challenges like Islamic monetary policy etc.
Therefore, the Islamic banking and finance industry should move to the next phase that can lead to the implementation of real Islamic economic system into the society and the next phase would be the real practices of Mudaraba and Musharaka. It is a fact that there are many hindrances in this way but there is a need to do effective research, take effective steps and make proper strategy by all stakeholders of the society i.e. practitioners, researchers, central bank, regulatory authorities and the government etc.
The Author is Head of Shariah Compliance, Bank Makramah Limited