Islam prohibits usury.

It instructs all its followers to stay away from taking or giving any form of interest. Now interest, of course, is one of the basic foundations of banking. Which is why I flinch with disgust every single time I come across the paradoxical term - ‘Islamic Banking’. The whole idea behind prohibiting interest is to ensure that the borrower does not get taxed or punished. But with concepts like Murabaha, a customer faces an extra payment anyway. So what’s the deal?

For those who are new to Murabaha, it’s a typical Islamic banking product, as far as Shariah-compliance goes. Murabaha involves the bank purchasing a commodity at the market-value and then selling it to the customer at a higher price than the market-value. Instead of interest in a traditional loan, the bank makes a profit with the difference of the purchase value. Vehicle murabaha’s are a common sight in Islamic banks around the world. A simple example - you can’t afford a brand new Swift for 4.5 lakhs, so the bank purchases it at 4 and sells it to you at 5. The vehicle is under their ownership until you complete the installments.

But guess what? You end up paying 50k more. And that’s what it really is - a tweaked loophole, something that some folks are trying to exploit.

Islamic Banking has had its share of success in Arab nations, with many banks opening an Islamic branch and some even starting their own Islamic bank. The Middle East Bank in Dubai recently underwent a ‘conversion’ to Emirates Islamic Bank under the Emirates Banking Group. It’s being both - adopted and accepted.

But I don’t see something like that happening in this nation. For one, I haven’t seen the Muslim community unite and speak against usury in contemporary India. I’ve known many Muslims who invest in mutual funds, shares and traditional non-Shariah compliant banking products. Most Muslims in India who would go on to bank tend to think with a secular starting point. The government has done a decent job of separating the religion from an average Indian’s daily life, and most Muslims are already accustomed to getting through their day with their own adjustments as far as the faith is concerned. So, the first challenge would be to get the Muslim population of India to cross over to Shariah-compliant banking products, and they would have to cite the teachings from Islam’s core to bring about the change.

But hey, the bigger challenge would be to keep them on. Tax, if anything, is a killer in the nation and I don’t see how a Shariah-compliant banking product can offer tax-benefits to people who invest in it. This would, in all probability, take a serious hit on the Islamic banks in terms of popularity when everyone figure out that they don’t get much tax benefits anyway. Only the devout, who follow the Book to the T, would end up being loyal customers to an Islamic bank. And that’s a small number - hardly enough to sustain the operations of a financial institution.

There are one-off incidents, but on the whole, Muslims in India have managed to co-exist very well with their Hindu and Christian counterparts. Barring the Shiv Sena and the Godhra incidents, newer governments have done their bit to enforce that the Muslim community do not feel like a minority, even as the media might paint a different image. As we move towards religious harmony, setting up Islamic banks and enforcing it on the people not only threatens to divide the customers of India’s banking industry today, but it also gives right-wing Hindu extremists and the likes of the Sena a whisker of an opportunity to speak up against this, sparking more communal violence.

Islamic Banking might just make those extremist idiots look like smart-alecks. We don’t want that, do we?

It would be best if existing retail banks offer Islamic products within their current schemes and carry out their ledger-separation, overlooked by a Shariah authority, who can certify that the profit is indeed separated. Besides, it offers a more legitimate front - the Sena would have to think twice before attacking at a larger and more ‘legitimate’ organization like ICICI, Stancy, HDFC or HSBC.

We’d rather focus on the scams and bribery and give the common man his due. And work on the tax - it burns a landmine in the pocket.