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Published On:23 June 2011
Posted by Indian Muslim Observer

Understanding Islamic Banking and Finance

By Dr. Nazir Ahmad Gilkar & Dr. Farooq A Shah

The current global economic recession that triggered in 2007-08 has yet again proved the failure of the prevailing financial architecture that is founded on the interest based conventional banking system. Prior to the present economic crisis, there have been numerous breakdown instances of the so called time tested world financial mechanism of which interest is a key component. The current global economic meltdown, as everyone knows, is the offshoot of the sub-prime mortgage crisis that emanated from the U S. The crisis was, however, no longer confined to the housing sector and the eventuality that occurred in September, 2008 shook the nerves of some most powerful economies of the world which were hitherto champions of the free market interest based economic system. The crisis that is often considered as the worst after the World War II and even harsher than the Great Depression of 1930s soon engulfed the whole world which is now highly globalized. Experts of interest free financial mechanism dub the crisis as the ‘crisis of confidence’ in the prevailing financial system and argue that there is a ‘systemic flaw’ inherent in the conventional interest based banking.

In the wake of continual global recessions over the last few decades including the latest one, economists have started serious discussions focusing on the need for rationalizing and reforming the global financial order in a way that prevents the recurrent tremors in the global financial mechanism. And researchers now believe that the latest global financial crisis, that the world is still struggling to recover from, could have been evaded had there been interest free (read Islamic) banking system in place of the conventional one. It is in this backdrop that the Department of Business and Financial Studies (DBFS), University of Kashmir in collaboration with the Institute of Objective Studies, New Delhi organized a 3-Day International Conference on Interest Free Institutional Mechanism (Banking, Finance and Insurance) for Promoting Investment on 3rd-5th June, 2011.

The theme of the conference being most relevant in the contemporary financially tumultuous times, the conference had evoked an overwhelming response from experts, scholars and researchers of conventional and Islamic economics and finance from India and abroad like Malaysia, Indonesia, Bangladesh, Iran etc. Scholars and experts from all these countries had subscribed their papers for presentation in the conference. Despite the fact that due to some problems beyond the control of organizers, most of the delegates from outside India could not ultimately make it to the conference, the holding of conference on such a topical theme is a milestone in the scholarship history of Kashmir.
Besides inaugural and valedictory sessions, the operative part of the conference comprised of five business sessions spread over 2 days. Keeping in view the number and substance of the papers covering multi-dimensions of the main theme, the conference was really international in essence.

The Inaugural Session which was presided over by Prof. Talat Ahmad, Vice Chancellor, University of Kashmir, was attended by a galaxy of scholars from Islamic banking and finance, industry and banking executives, economic experts and academia from within and outside the country. Mr. K Rehman Khan, Deputy Chairman, Rajya Sabha who is also a qualified chartered accountant was the chief guest at the inaugural function. Besides, Prof. M Manzoor Alam, Chairman, Institute of Objective Studies (IOS), New Delhi, Dr. Ausaf Ahmad Khan, Former Head, Special Assignments, Islamic Development Bank, Jeddah and General Secretary IOS, Prof. Abdul Wahid Qureshi, Vice Chancellor, Central University of Kashmir, Prof. S Fayyaz Ahmad, Registrar, University of Kashmir, Prof. M Zahoor Khan, IOS and Prof. Nazir A Nazir, Head DBFS, University of Kashmir were present on the occasion.

The proceedings of the Inaugural Function commenced with the recitation of sacred verses from the Holy Quran. While welcoming the guests and delegates, Prof. Nazir A Nazir, Conference Director, highlighted the role of the conventional interest based banking and finance in the recent global financial meltdown and emphasized that the current world financial scenario has forced the economists and financial experts to think about a viable substitute to the existing banking and financial system. In his Welcome Address, Prof. Nazir also spelt-out the objectives of the conference. In his introductory remarks, Prof. M Manzoor Alam, Conference Observer, underlined the need for organizing such high profile events on such compelling themes and highlighted the role played by IOS, New Delhi in this regard. In his Inaugural Address, Mr. K Rehman Khan opined that interest free Islamic financial mechanism needs to be seriously considered as a supplementary and stressed the need for collaborative efforts of conventional economists and scholars of Islamic banking and finance for designing a proper regulatory and institutional mechanism and developing relevant accounting and auditing standards.

In his Presidential Address, Prof. Talat Ahmad, Vice Chancellor, University of Kashmir, underscored the systemic flaw in the conventional banking and financial system that led to the collapse of some leading Wall Street Institutions and big American financial companies and the consequent spell of global financial recession the world is still struggling to recover from. Prof. S Fayyaz Ahmad, Registrar, University of Kashmir while proposing the formal vote of thanks expressed gratitude to the organizers and all those associated with the conference for organizing such a mega event in the University of Kashmir.

During the course of five business sessions spread over two days, fifty one papers were contributed in all. These papers were categorized into five sub-themes and presented in the relevant sessions. These include:

• Developing an Interest Free Economy: Legal and Regulatory Challenges
• Interest Free Financing in India: Evolving an Appropriate Framework
• Risk Management and Islamic Finance
• Interest Free Non-banking Financial Institutions and their Regulation
• Developing an Institutional Structure for Islamic Financial Markets

The five business sessions were chaired and co-chaired by experts from India and abroad. These include Mr. K Rehman Khan, Deputy Chairman, Rajya Sabha; Prof. M Manzoor Alam, Chairman, IOS, New Delhi; Prof. Musadiq Amin Sahaf, Dean, Faculty of Commerce and Management Studies, University of Kashmir; Mr. R K Dubey, Executive Director, Central Bank of India; Prof. Mohi-ud-Din Sangmi; Prof. Khursheed A Butt, Director, South Campus, University of Kashmir; Dr. Manzoor A Shah; Dr. Ausaf Ahmad, General Secretary, IOS; Prof. M Zahoor Khan, IOS; Dr. R A Rainayee and Dr. Kareem Mohammad, Embassy of Islamic Republic of Iran, New Delhi. Besides, each business session opened with the key note address delivered by the key note speaker.
The papers, authored by one hundred and one scholars, highlighted a variety of aspects ranging from the reasons of the intermittent breakdown of the interest based conventional banking and economic system to the development of the more humane, natural and interest free financial architecture capable of ensuring equitable and inclusive economic growth of the mankind at the global level. More pertinently, a number of presentations underscored the need for adoption of interest free banking practices and maintained that Islamic and shariah compliant financial architecture must at least supplement the traditional banking system that is essentially exploitative and has historically done more damage than good to the mankind. Interestingly, those who criticized the interest based conventional market mechanism as being speculative and abusive and vehemently favored its replacement by the Islamic financial system included some non-muslim scholars. Each technical session concluded with queries and questions from the audience which were responded to scholarly by the paper presenters.

In addition to the five business sessions, a special session conducted by a great Islamic scholar Mufti Nazir Ahmad Qasmi was a special feature of the conference. In his spectacular style, the great Islamic luminary threw light on the concept of Islamic finance and presented an elaborative account of historical perspective, current scenario and future prospects of interest free banking. The scholar pleaded an effective interface among the scholars of Islamic finance, legal experts, bankers, academia and accounting professionals. The illuminating session ended with a live interaction between the speaker and the audience.

A unique feature of the international conference was the felicitation session in which some leading personalities from industry, banking and academia were awarded for their contribution to the society. These include Prof. S Fayyaz Ahmed, Registrar, University of Kashmir; Mr. Tafazzul Husain of J&K Bank Ltd.; Mr. Abdul Hamid Bhat of Rahim Greens; Mr. Zubair Iqbal of HDFC Bank Ltd.; Mr. Zahoor Ahmad Tak of J&K Yateem Trust; Mr. Ajaz Ahmad Bandey of Bandey Impex Pvt. Ltd and Prof. Hameed Naseem Rafiabadi, a renowned Islamic scholar.

The 3-Day Conference concluded with the valedictory session which was presided over by Prof. S Fayyaz Ahmad, Registrar, University of Kashmir. Mr. Tafazzul Husain, President, J&K Bank Ltd. was the chief guest on the occasion. Speaking on the occasion, Mr. Tafazzul Hussain highlighted the role of J&K Bank Ltd. in the economic development of the society and spelt out the possibility of introducing the interest free banking in the country alongside the conventional banking. In his presidential remarks, Prof. S Fayyaz Ahmad underlined the significance of organizing such international events and stressed the need for evolving a consensus on such a crucial global issue. Earlier in the session, Prof. Musadiq Amin Sahaf presented the resolutions evolved during the course of deliberations in the conference which were adopted by the house. These include need for introduction of Diploma and Certificate Courses on Interest Free and Islamic Banking and Finance in the universities, and continual interface among academia, practitioners, professionals and scholars for developing a regulatory framework for interest free banking and finance. The conference ended with the distribution of certificates among the delegates and participants followed by the vote of thanks proposed by Prof. Khursheed A Butt. The proceedings of the inaugural and business sessions were regulated by Dr. S Parvaiz A Shah, while as Dr. Reyaz A Rainayee conducted the valedictory session.

[Dr. Nazir Ahmad Gilkar can be reached at gilkarna@rediffmail.com. Dr. Farooq A Shah can be reached at & drshahfa@yahoo.com]

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Posted by Indian Muslim Observer on June 23, 2011. Filed under , , , , . You can follow any responses to this entry through the RSS 2.0. Feel free to leave a response

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