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06 April 2012

ISLAMIC FINANCE: Most interest-free banks in India have turned out to be cheats, defaulters

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By Maqbool Ahmed Siraj


Most interest-free banks and investment companies have turned out to be cheats, defaulters or failures. Unless the RBI stands guarantee, no one should deposit or invest money. The Baitun Nasr Coop Society of Mumbai is a classic case of failure. The Society invested huge funds in booming real estate in the city. When boom turned into doom, the values of the property crashed and Baitun Nasr had no liquidity to run the daily transaction. The first hint of danger made the depositors made a beeline at the offices of Baitun Nasr in Mahim. The company is facing litigation, its directors have relocated themselves and remain incognito. To my knowledge the directors were innocent and honest.


Al-Ameen Islamic Financial Investment Company (AIFIC) of Bangalore vanished with Rs. 18 crore of the deposits ie. Khushahal Deposit, Hajj Deposits, Ramadan deposits. Several widows and NRIs had deposited their money in the AIFIC. The company was liquidated as huge money was defalcated. Some of the company directors–who are big names in politics today from Karnataka–had swindled the money. Cases are pending against them in Bangalore courts. They are so powerful in politics that they have brought stay on court proceedings in lower courts against them. In this case, the directors were complete fraudsters and politically influential.
Ittefaq and Falah Investments from Indore had huge operations in Delhi but simply vanished from the scene with several directors behind bars for long. What happened is a mystery.


Barkat Investment–where this author too had deposited his money in 1992–crashed and disappeared into thin air by 1998. It still owes rent arrears to Darussalam complex, a building that generates revenue for the 120 year-old Muslim Orphanage of Bangalore.


Islamic Welfare Society, which had several branches in Karnataka, run by Jamaate Islami Hind, wound up its operations without any notice to its depositors. This author too had made some deposits. They were never paid back. The very same jamaat is now making lot of waves about the interest-free banks and lending.


Al-Meezan Leathers, Madras too turned out to be complete cheats. They swindled almost Rs. 3 crore in late 1980s. Several NRIs had invested their money. The directors of the company were members of the Jamaat. It appears the Al Meezan had shifted the invested funds to an existing and old leather tanning company which was into export of leather to USSR. With USSR economy in shambles, the existing company’s fortunes nosedived and with this both companies went broke. These NRI investors from Gulf have almost already gone back to their abodes in India, crestfallen and despondent.


It is not that interest-free investments (or Halal investment) is per se bad. But in absence of a regulatory authority, there is no way one can have trust in these bodies. India is a paradise of cheats. Companies, investments and banks despite being monitored by regulatory authority, cheat the investors, depositors and share holders. Even with a regulatory body, they can make hay while sun shines. NRIs will be better advised not to invest money in any Halal or Interest free bank or investment company, at least in India. They should learn from the hard knocks of realism. It is better to be safe than sorry later.


Interest free system has a lot of loopholes. Don’t get pleased with Citibank or Barclays opening their interest-free windows. Currently picking is rich with those in the Gulf flush with extra money and surcharged with emotions. To boot, they expect no interest. It is quite possible that they will entice deposits by paying dividends to the early depositors. These will be paid out by new deposits. This might gladden hearts. But as a business and investment system interest free economy requires a lot of research and fine-tuning. Economy is a business of 2+2=4. It is not run by emotions. We Muslims, all over the world, have no manufacturing economy. The ones who appear rich, are so because they are selling away their mineral wealth. We do not have any hold over the current economy. Our money has to be necessarily deposited in the banks of the non-Muslims. They know how to pinch money out of our pockets. Since the interest-free economy is currently swaying emotions, they are out to make a cut.


It is time we trained our youth in finance, economy, monetary system investment, accountancy, industrial finance, business finance, etc. We have hardly any knowledge of world finance. Stranglehold of certain communities and lobbies over the subject and the system is capable of fooling everybody. America is not the place to learn it. American economy is currently based on the paper currency it is able to print and hand over to its stooges due to its military superiority. Once that military superiority is challenged, the economy will come down like a pack of cards. We must make our own beginning, honest, earnest, small though.


Paper currency is wreaking havoc over the world finances. We need to understand it. Simultaneously, we need to develop manufacturing base. There is lot of sense when Islam enjoins people to barter and trade. It is risky to trade in currency without it being backed by any commodity.


Muslims have a tendency to trust and be happy when some Islamic precept is endorsed by the West. Since they are opening interest-free windows, we are jumping with joy. This is how we also believe ‘Islam is the fastest growing religion in the US’. Tomorrow the same glad-tidings will be used to demonize the religion of Islam. Let us beware of the trap. My words will sadden a lot of hearts and even minds, possibly.


Let us remember that there is no way forward without our own research and hard work. The reality is that we are hardly working for all that.


[Maqbool Ahmad Siraj is a senior Journalist based at Bamgalore. He can be contacted at maqsiraj@gmail.com]

1 comment:

  1. this is not first Islamic bank
    there was a bank in Kerala itself
    it is false statement Islam means truth then why we spread false statement for publicity

    ReplyDelete