The current turmoil in the Arab world and in many Muslim countries can prove to be a major hindrance to the growth of Islamic finance not only in those countries but in the rest of the world as well. The appalling practices by some fighters as well as the vicious cycle of violence have been tarnishing the image of Islam which has been suffering ever since the tragic events of September Eleven in 2001 which were blamed on a number of Middle Eastern youth.
An estimated 12% of Muslims are presently using Islamic banking in countries where it is a significant business activity. The low interest by Muslims, even in Muslim countries where Islamic banks have been in existence for over 20 years, is blamed on the Muslim mass market’s discontent with the industry’s far from satisfactory practices.
The current cycle of violence can only make things worse; even those Muslims who currently use Islamic banking are susceptible to being turned off and may boycott the Islamic banking industry, especially if they live in non-Muslim countries, in order to avoid guilt by association and to escape the stigma of appearing to be “fanatic”.
The industry presently depends to some extent on interest from non-Muslims who represent about 60% of investors in Sukuks and Islamic mutual funds, among other products. Non-Muslims are typically motivated by financial gain, portfolio diversification, and some are attracted to the similarity between Islamic finance and ethical finance. It is the last group that might be swayed by the current military events since the “political” struggle is following a very bloody path with suicide attacks, savage killings and the tendency of most factions to “take no prisoners”. It is worth remembering that Islam considers that killing a person for no good reason is the same as taking the life of entire mankind.
The impetus is upon Islamic religious institutions and clergymen to make an effort to clear Islam from any responsibility for the atrocities that have become common practice. Financial support of such campaigns from the Islamic banking industry would be worthwhile, since it is bound to affect their bottom line as well as their brand name. For a start there is a need to intensify movements to educate the public worldwide about the positive aspects of Islam and its promotion of compassion, equity, justice, the wellbeing of all humanity and the freedom of belief.
With some of the struggles taking on a sectarian appearance, it is worth emphasizing Islam’s call for religious tolerance “there shall be no compulsion in matters of faith” (verse 2:256 of the Qur’an) which remains Islam’s best defense