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Islamic Banking in India: Scope and Challenges
Abstract
India is a growing country which needs financial stability to facilitate each and every individual in this highly populated country. A bulk of Indian population until today does not have bank accounts. Some national and governmental reports show that minorities, especially Muslim minorities, until now were not a part of the financial inclusion. It seems that, interest-free banks might bridge this gap, if it is allowed in India. The aim to write this paper to examine the viability and scope of Islamic banking in India. This study pointed out that the Islamic banking is not only in favour of a specific community but it's for all. Moreover, if this system is being allowed, it would accelerate Indian economy definitely. This paper also tries to find out the scope of Islamic banking in India along with shedding lights upon the various issues and challenges involved in getting full-fledged Islamic banking licence from the regulatory bodies.
... The literature on Islamic banking has proliferated over the last few years, covering not only countries with Muslim majorities, such as Tunisia (Kaabachi&Obeid, 2016;Echchabi et al., 2016), Morocco (Echchabi&Aziz, 2012), Yemen (Ayedh et al., 2014), Bangladesh (Uddin et al, 2016), Malaysia (Saiti, 2015;Che-Ha et al., 2016;Muhamad&Alwi, 2015), and Indonesia (Widigdo et al, 2016), but also countries with significant Muslim minorities such as India (Islam&Rahman, 2017;Beg, 2016;Ahmed, 2017), Nigeria (Yahaya et al., 2016;Ringim, 2014), andMacedonia (Abdulahi&Shaharuddin, 2016). Interest in banks based on Islamic principles has been manifest even in some countries in which Muslims represent relatively small percentages of the total population, such as Singapore (Gerrard&Cunningham, 1997), and South Africa (Bodibe et al., 2016;Vahed&Hoque, 2016). ...
Islamic banks have, over the last few decades, become very
popular in the Gulf countries and in some countries in Southeast Asia with a
majority Muslim population. They are on the rise even in some western cities
such as London or New York which have witnessed a significant increase in
their Muslim population. In this context, it is then surprising to see that in
Turkey, a country in which almost 100% of the population is Muslim, the
Islamic banking system is still in its incipient stage. This study has
investigated the reasons for the underdevelopment of the Islamic banking
system in Turkey. We found that, due to the long period of secularism, most
Turks separate religion from business and select their bank based on
financial advantages, diversity of financial products and quality of service
rather than based on the need to adhere to Shari’a principles. Many people
also do not trust that these institutions are really Shari’a-compliant and
safe. This is partly due to the customers’ lack of understanding of how these
banks operate and partly due to the numerous cases of bad practices
reported by the media and the academic literature. We conclude that, while
their assets and share will most probably increase over the next 10 years it
seems very unlikely that Islamic banks will really become a sustainable
alternative banking system in Turkey. The Islamic banking system will
rather remain an additional or complementary banking system.
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