What has been the contribution of Islamic
banks to helping the poor and the needy? Almost nothing, and it’s about time to
change that, according to Abdul Halim bin Ismail, the recipient of the Royal
Award for Islamic Finance 2014.
charity houses would collect donations from the private sector and
utilize the funds to make sound investments, with profits supporting programs
that improve livelihood, health and education services for disadvantaged
populations.Bin Ismail is proposing a new way for the Islamic finance sector to
do more for society. His idea calls on central banks, most notably in
Muslim-majority nations, to issue licenses to Islamic banks that would allow
them to establish subsidiaries — or Sadaqah houses — catering to the social
would be very humbling and very rewarding if this initiative is implemented in
my lifetime,” bin Ismail said. “And I hope to encourage other like-minded
individuals to push the envelope and introduce innovations in Islamic finance
that will grow the industry and also use it to help others.”
this exclusive interview, the renowned Islamic finance expert from Malaysia
shared his aspirations for the proposal and the
Islamic banking sector.
What makes your proposed solution unique, and what
do you see as its biggest socio-economic benefits for Muslims?
believe that the fortunate, including myself, have a responsibility to society,
and my proposal is to introduce a charity scheme to be operated by Islamic
banks that would make it easier for people to give to the needy and, in the
process, raise the bar around the notion of “ethical banking,” which
Islamic banking is strongly associated with.
introducing banking products and services specifically for charity,
it would create a radical new way of facilitating donations to society’s most
needy that would also be ethical in its approach to charity.
banking has achieved tremendous growth in the past 30 years, particularly in
the private and public sector, but it still needs to address the gap in social
welfare by prioritizing charity to the poor as a key area of business.
are over 1 billion Muslims in the world today and in Southeast Asia,
the population is 250 million. Sadly, poverty is a common problem among many
Muslim-majority nations. Over half a billion of the world’s poor, who earn
below $2 per day, come from Indonesia, Bangladesh, Pakistan, Nigeria and Egypt.
are often people who have tried very hard, but they have not had the good
fortune to secure all that is required to make ends meet and sustain a certain
quality of life. These are the people we can and should reach out to and
help, by providing them the support and opportunity they need to rise from
hope the Sadaqah houses will result in a sustainable charity system for the
less fortunate, raising millions and effecting real, lasting change.
What is the level of interest in contributing to
believe my proposal for Sadaqah houses taps into the social sensibilities of
Muslims around the world as it makes it easy for individuals to contribute to
charity in perpetuity, with their donations channelled toward initiatives that
will allow society to continue benefiting from in the long term.
is one of the main tenets of Islam, which teaches its followers to give to the
less fortunate and that they will be rewarded for their good deeds in the
thereafter. Muslims will view these donations as
an investment — an investment in their lives in the thereafter,
as these contributions to charity in perpetuity continue to be counted as good
deeds even after death.
it is crucial for the banks to develop an efficient and transparent transaction
system. The demand is already there, but there is not yet a system in place
where transaction is easy and non-time consuming for people who have the means
and the desire to give to charity. Currently, these people don’t know who to
reach out to, and the proposed Sadaqah house can facilitate that process.
would also get more people to contribute is if banking groups can come up with
highly differentiated or imaginative products under the Sadaqah house.
do also see interest coming from the non-Muslim segment, the same way this
segment has supported the growth of Islamic banking in the past 30 years.
Though Islamic banking was initially aimed at addressing the banking
requirements of the Muslim community, its current wider acceptance across the
world has been encouraging. I believe the appeal is in the fact that their
donations will be channelled towards initiatives which society can benefit from
for the long term.
What role does Islamic financing play in financial
finance is deeply connected with the real economy, offering ethical investments
and funding options for businesses. The principles of Islamic finance also
encourage inclusiveness and collaboration to create a fair and equitable
financial system that is accessible to all.
finance has achieved such phenomenal growth in the past 30 years, supported by
both Muslims and non-Muslims alike. It has expanded its presence to almost
everywhere in the world. However, these growths are limited to the public and
private sector so I see much potential for Islamic banking to achieve further
development is incomplete when it comes to the social welfare sector. There are
areas where more could be done to make Islamic banking sector more aligned to
Islamic principles. In particular, Islamic banks need to address the gap in
social welfare by prioritizing charity to the poor as a key area of business.
my proposal, I hope to see banks integrate charity into their businesses, which
would benefit families living below the breadline, the homeless and the
long-term unemployed from all over the world.
/ 07 May 2015)
Alfalah Consulting - Kuala Lumpur: www.alfalahconsulting.com
Islamic Investment Malaysia: www.islamic-invest-malaysia.com