London has raised its flag as a hub for Islamic finance. A clear signal of intent was outlined at the 9th World Islamic Economic Forum (WIEF), held in London towards the end of 2013, by David Cameron, Baroness Warsi, and Boris Johnson. Notably, this was the first time that WIEF had ventured outside of the Muslim world.
This year, WIEF is being hosted in Dubai – another player looking to hold the reigns of a lucrative and blossoming field of Muslim economics, attempting to galvanise Muslim majority and minority geographies. What is now being termed an Islamic economy, can be broken down into seven core sectors, following the 2013 report by Thomson Reuters and DinarStandard: Food, Finance, Clothing, Tourism, Media/Recreation, Pharmaceuticals, and Cosmetics.
It makes perfect sense that Islamic banking and finance should underpin the full range of Islamic sectors. This year, I along with other thought leaders such as Rushdi Siddiqui, and Abdalhamid Evans, have been championing the idea that there needs to be a convergence between the practices of Islamic finance and Halal. The Islamic Finance Industry is massive, with more than USD$1.3 trillion of financial assets recorded in 2012; which included Banking, Takaful, Sukuk, and funds. The Islamic Banking industry alone is estimated to reach about 4 trillion dollars by 2018. The global halal industry is valued currently at USD $2.3 trillion.
However, despite their successes, Islamic Finance and Halal currently are demonstrating tendencies towards a reliance on being product driven. Here, product quality and compliance first and foremost means atomising and judging ingredients and processes. However, I raise the question whether Islamic and Halal markets should be more people-driven and people-centric?
It could be argued that in the initial stages of development of Islamic finance and Halal, the reasons for their inception were that they were a reaction in Muslim minority or narrow majority populations for a need to provide assurances that ‘meat and money’, for want of a better term, were fit for Muslim consumption. Also we should not overlook the fact that they presented opportunities for Muslim economic and business growth.
Furthermore, Islamic finance could alternatively be viewed as Halal finance, as Halal means permissibility according to the teachings of Islam. Halal commodities, such as food, beverages, pharmaceuticals and cosmetics, which are branded with a Halal logo, have to be 100 per cent Halal, otherwise they are not Halal. However, whilst Islamic Finance is Halal, in many instances it falls short of being 100 per cent Halal according to the same benchmarked rules applied to Halal labelled commodities. And within this paradigm lies a paradox.
Muslims continue to grab headlines, with regards their religious beliefs, practices, political views, role in society, and of course geopolitical events. On the other hand, whilst globalisation and transnationalism appears to be steering mainstream business thought and practice on a path towards apoliticism, Muslim majorities and minorities are raising the flag for the importance and role of guiding principles derived from religion, which as a result of the current landscape has also rendered it infused with politics and ideological struggle.
In postmodern, capitalist, and secular societies overtly discussing and celebrating religion in business, and especially Islam, is considered to be taboo in many ways. However, Muslims continue to signal strongly that their Islamic code of ethics have to permeate business practice in such a way that business is a collective and societal obligation and that wider stakeholders outside of organisations are empowered to hold businesses to account, according to legal principles, which encompass the wider facets of human existence.
If we bring discussions back to the UK experience, we have witnessed the arrival of sukuks and shari’ah student loans, and there are discussions about whether Islamic finance would be better served by being referred to as Alternative finance, or Ethical finance. Many businesses choose Islamic banks based upon size, fit, and customer service, not necessarily on shari’ah compliance. And it is apparent that Islamic finance is ill-equipped in being able to serve high-street consumers, regardless of their faith, amongst concerns that this is more about a middle-class lifestyle offering.
Mortgages have been difficult to obtain, especially damning when some customers have been turned down looking to fund mosque projects with sizeable deposits. The reasons for Baroness Warsi’s resignation from the foreign office has opened up debates and the departure of HSBC Amanah finance, and the recent closure of HSBC accounts of a number of Muslim groups have also left a bad taste, reigniting the suspicions of shari’ah opponents and Muslim purists, claiming self-fulfilling prophecies of doom.
The Prime Minister has proposed that the UK should be a centre of excellence for Islamic finance, sentiment I would extend to Halal, other business and management issues. However, universities have been slow on the uptake for a number of reasons and job creation on home soil in these fields appears to be slower than the interest and demand, especially from British Muslims and students from the Muslim world looking for a UK experience and approach.
So what can be done?
Following recent global events in the financial world, I think that this is about more than simply cheerleading and chanting a mantra calling for a new code of ethics. It’s about more than quoting big numbers, growing population figures and, whilst of course important, attempts to co-opt the movement to address geopolitical and societal challenges. Because while there remain big society debates, which speculate on issues such as cities like Marseilles (already one-third Muslim and predicted to be the first Muslim majority city in Western Europe), the current top-down approach to Islamic finance will not address these matters. They will remain rhetorical tropes.
My suggestion is that the focus should shift towards Islamic finance being spearheaded by Halal. The UK is off the pace compared to New Zealand and Australia, who have increased their food exports to Muslim markets significantly. Furthermore, as the reports have suggested the Halal industry has expanded into Pharmaceuticals, Cosmetics, Fashion, and Media – these are all areas that the UK is strong in.
Secondly, ethics should be enacted through supporting local businesses and entrepreneurs. If Islamic finance could present an alternative approach to banking, where businesses were given access to further services, which help them export to emerging Muslim world markets, then this would make it more attractive and embody the concept of profit and risk-sharing espoused by Islamic finance. Banks could forge ties with universities and a pool of consultants in areas such as marketing, IT, and logistics. This way, codes of ethics become collaborative and aligned with the hearts and minds of local communities.
– See more at: http://www.respublica.org.uk/item/Repositioning-Islamic-finance-as-a-grassroots-international-business-catalyst#sthash.jrK0JDI7.dpuf