Participatory banking is beneficial for all, says Ansari

Pointing out the “striking similarities” between India’s traditional financial practices and the usury-averse principles of Islamic banking

Pointing out the “striking similarities” between India’s traditional financial practices and the usury-averse principles of Islamic banking, Vice President Hamid Ansari on Friday made a strong argument in favour of encouraging Islamic financial institutions such as participatory banking in India, which now command 2 trillion $ in assets across the world.

Since such financing is not based on interest, it can be of special relevance for financing the poor but current banking laws in India don’t allow it, he said.

Inaugurating an international conference on ‘Participatory Banking for All’ being organised by the Indo-Arab Economic Co-operation Forum in the capital, Ansari cited the travelogue of mathematician and explorer Al-Biruni who had summed up his understanding of Hinduism after extensive travels within India in the 10th century in his book Ta’rikh al-Hind.

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“Al-Biruni had noted that the similarities between the financial practices in India at that time and the Islamic principles that prohibit usury were striking. There was no profit motive in India’s traditional banking,” Ansari said. Stressing that the picture of human development is “stratified” across the world, he added that participatory banking addresses the banking and financial needs of people across all sections of society.

Referring to the success stories in micro-finance and self-help groups such as Bangladesh’s Grameen Bank, Ansari said such instances were already seen in India. “Private equity funds and venture capital funds are now successfully using the participatory banking principle of joint ventures,” he added. Though there are no Islamic banks in India yet, there are two Islamic finance companies and one co-operative society functioning.

Praising the Islamic banking system, Deputy Chairman of the Rajya Sabha K Rehman Khan said that there is a need to introduce it in India. “It’s time we tell the Reserve Bank of India and the Securities Exchange Board of India that there is a need to allow the Islamic banking system.”

Sulaiman N Al Qimlas, Chairman of Bayt Al Maal, an Islamic financial institution in Kuwait, said that they are interested in entering India. “We are here to put our money. Bayt Al Maal is seeking an Islamic license to operate in India,” he said.

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Indian Banks Association Chairman M B N Rao said there is a need to consider a framework for allowing Islamic banking institutions. “We will study the issue and raise it with the RBI if needed. With their assets now at 2 trillion $, RBI would be watching closely,” said Rao.