How About We Stop the Wayang in Islamic Banking?

By Rosana Gulzar Mohd

I love Malaysia, don’t get me wrong. Every so often, I find myself back in the country for the nasi kandaq (Give the mamaks a Nobel Peace Prize, I say!) and my best friends #tillJannah are there. But Malaysians, I understand, have a peculiar way of doing things, somewhat like the diagram below. So something that can take 2 minutes generally take 20.

With all due respect to all that have been done under the guise of ‘Islamic’ finance in Malaysia, I find that we keep missing the point. It is commendable that we want to change the course. It shows acknowledgment that what ‘Islamic’ banks are doing now is far from ideal. And as far as I know, Bank Negara Malaysia is the only central bank in the world which is actively trying to reform its Islamic banking industry. But why does it keep launching one superfluous initiative after another?

Perhaps it is because we keep sharing half-baked narratives in our classes and conferences? In the three, beautiful years I was in KL, I noticed these gaps: One group is busy criticising. “Islamic banks are not Islamic lah!” So what’s the solution? Silence. Another group fervently chants the rhetoric of their master. “Risk sharing is the solution!” But what exactly is it and how do we implement it in this riba-dominated world? Its followers made the story up as they went along and the ideas were far from practical. Worrying especially is when I found that the problem itself is not well-articulated. No one could explain the story from the beginning (Did Islamic banking start off wrongly?) to the body (Are all these problems because of the model, commercial banking?) to the end (Really? The ‘Sustainability’ movement is the best we could come up with? The conventional banks in Singapore and Europe are already doing it and doing it well! So the solution is for ‘Islamic’ banks to follow even more of their riba-based, profit-maximising counterparts, which help me remember please, plunged the world into a financial crisis 10 years ago?). Well done, us.

If we don’t even understand the full narrative for the problems in Islamic Banking, how can we begin to correct it? At this rate, even in 200 years, our great grandchildren will still be discussing tawarruq vs. genuine profit- and loss-sharing which Islamic Banks are supposed to be based on. So ni, I nak cerita kat you all, the untold stories of Islamic Banking so that we get the full picture and can contribute towards the solution. And I have a good one, it’s in the third story. For now, you just stay tune. I am preparing them in this order:

  1. Islamic Banking is not for Commercial Banking
  2. The problem with transplanting the ‘Sustainability’ movement on Islamic Banking
  3. True Islamic Banking is in the Cooperative Banking model