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Islamic Banking: Addressing the Issue of System Viability
Thesis or dissertation
University of Exeter
The basic premise and ultimate purpose of this thesis is to show reasonable proof that Islamic banking is theoretically sound, and is, despite certain discernable flaws in its contemporary applications, a viable, working system overall. By viable, it is meant by definition that Islamic banking is a ‘vital, financially sustainable enterprise’ in the modern real world context. The methodology employed towards proving the efficacy of this distinctive religiously based system of finance, flows from the intuition that developing an intimate and comprehensive understanding of the various components from which the practice of Islam and Islamic banking has historically evolved, is a necessary and inseparable precondition to being able to address the issue of viability; an issue, the ultimate real time assessment of which it is also contended, must be left to the final portion of the thesis. Towards this end, the present study ensues a constructive discourse of six chapters, with each chapter necessarily attending to a discrete, intelligible, analytical objective; yet is interconnected to the ultimate objective in that in due course, each piece incrementally and singularly contributes towards developing the requisite knowledge referred to above as being critical in order to make a determinative evaluation on the issue of viability. Thus, the stages of informational development toward this evaluative ability follow the course initiated by a required investigation of (1) the historical purports, intellectual dynamics and restrictive frontiers of traditional paradigms; (2) the challenge of modernity that presently confronts the Islamic historical identity; (3) how that challenge facilitated the drive towards arriving at the theoretical underpinnings of a modern Islamic economic infrastructure; (4) how from that Islamic economic infrastructure the challenge of Islamic banking was effectuated; and (5) an attempt to evaluate Islamic banking in its real time context. The information obtained was procured predominantly from written materials of those who in many cases are considered to be experts, pioneers, and/or advocates of what is intended to unfold with this newly developing system. In addition, the author attended a number of Islamic conferences and seminars, affording a first hand opportunity to meet, study, and discuss, with those engaged in the blossoming world of the subject matter being investigated, inclusive of listening to and making the acquaintance of some of the leading proponents of Islamic Economics and Islamic Banking quoted in my thesis. For a variety of reasons, in our modern day context, even the thought of an Islamically based banking system, originating from an indigenous series of economic propositions which in turn ultimately derive from basic and simple religious tenets, is almost literally unheard of. While this may understandably be true for a majority of non-Muslims, it arguably remains true as well for a significant portion of practicing Muslims. Thus arguably as well, a secondarily suggestive focus and challenge would be to determine whether such a system, borne of a distinctive religious culture, and originally intended to accommodate the needs of a singular religious population, can [reasonably be expected to] have any practical attraction to a wider variety of participants in and of the Western world, based as that world is, in its own economic and banking traditions; one which, with all its problems, still dominates the world today. Here it will be argued that certain realities within the conventional banking regime have contributed towards facilitating the entry of Islamic banking, and in the process, have suggested the ethical and practical application of the Islamic banking approach to non-Muslims. As well, regarding methodology, I attended a number of Islamic economic conferences and seminars, affording myself the opportunity to meet, study and pray with those engaged in the blossoming world of this and like subject matter, inclusive of listening to and making the acquaintance of some of the leading proponents of Islamic economics and banking quoted in my paper. In the end, it was a matter of combining left and right brain approaches, that is, rigourous, disciplined study and analysis, coupled with consistent meditations upon the matters concerned, which brought about this presentation, both in style and substance.
MPhil in Arab and Islamic Studies