Islamic finance, responsible finance: are they two worlds apart?

CASABLANCA – The IFN Morocco Roadshow that was held on Thursday, September 19th, in Casablanca along with other conferences I attended on Islamic finance have not answered the questions I have about the ethical approach of this industry.

The Roadshow highlighted the interest of foreign Islamic banks to operate in the Moroccan market. Among the reasons, as explained by the head of Local and International Investments, Treasury & Investment, QIIB, is to fill the gap of unmet demands of Islamic finance products; particularly, those which are addressed to small and medium enterprises, and those related to micro-finance.

Indeed, these specific products are not included in the portfolio of Dar Asafaa, the first fully fledged Islamic bank in Morocco. After a question in this context, about the absence of these products in Dar Assafa, the Board’s Chairman of Dar Asafaa, along with the managing director, IFAAS, agree that it is a question of maturity of this entity, that is still “a baby” as the IFAAS director did describe.

The second comment I voiced was: how sustainable is Islamic Finance? I received an answer, but it was not comprehensive. The answer explained the goal of the Islamic Finance project to be: “meeting peoples’ demands of financial products.” Does this answer imply that the notion of “sustainability,” “banks’ ethical responsibilities,” or “responsible lending” are not yet clear to Islamic finance professionals.

Furthermore, a question was raised by a journalist about the credibility of the label “Islamic bank” if it is operated by a non-Muslim entity in a non-Muslim country.  A bright answer was given by the director of Cross Border Tax, Deloitte tax & Consulting in Luxembourg who pointed out that “the funds of this type of finance are generated from Islamic sources and international banks’ major value is transparency.”

Transparency is a crucial element for a responsible financial institution; sincerity, truthfulness and openness should characterize all the operations in a bank, not only being transparent about its products’ related information and associated risks, but it should be expanded to its efforts to preserve the environment and to contribute to local development. If these elements are already treated by conventional financial institutions, Islamic financial institutions as well can demonstrate their collaboration with SRI through higher transparency and better reporting.

I would like to conclude this opinion with the most important question raised by the public: “Why there is a huge focus on the moniker of ‘Islamic finance’ more than ‘the values’ of this finance model?”. The director of global operations of the  Estidama foundation answered this question stating the following: “the Sharia conformity of the product is of paramount importance than the labeling. Merely naming a product ‘Islamic’ does not make it Islamic if it does not fulfill parameters of Sharia.

Today the non-Muslims are also banking with Islamic banks since it does not discriminate the beneficiary on the basis of religion, country, language or race.” However, this industry still might be perceived as a model that is tailored only for Muslim customers if it is not globally commercialized as a finance model that generates ethical values. I hope this question might convey a strong message to all the operators in this industry.