The popular book, 1000 Numbers & Reasons Why Dubai, prophesied regarding the UAE, “that in the next 3-5 years there is an expected establishment of new fully-fledged Islamic banks and companies, a whole scale conversion of some conventional banks into Islamic ones as well as Islamic product offerings by many conventional banks.” (p97) The book forecasted that the growth rate of Islamic banks in the United Arab Emirates is estimated at 11%.
Because 1000 Numbers and a myriad of articles have not explained what Islamic banks and products are, the recently published, Understanding Islamic Banking, by Joseph A. DiVanna, is most welcome. This may well be the definitive guide to the subject. DiVanna is a banking strategist, a business author, a global speaker and a management consultant. He is not a Muslim but he is respectful of the Muslim faith. His stance as an interested outsider may be an advantage as he seeks to clarify a complicated issue and address the questions that Muslims and non-Muslim customers are asking about Islamic finance.
The author has undertaken an extensive amount of reading as he writes about the history of Islamic banking and sets forth his explanations from religious books and legal interpretations. When asked, “What is the best way to understand Islamic society and specifically, Islamic banking?” DiVanna replies, “read the Holy Qur’an.” (pxiii) He is probably too humble to add, “And read my book!”
DiVanna shows how Islamic banking is shaped by the ethos and values of Islam in such ways as these:
* It is interest free (he also shows how Christianity promoted this policy in medieval times)
* It is multipurpose and not purely commercial
* It is strongly equity-related
* Banking transactions and investments must comply with Sharai law
* It is risk sharing
* It must have a sense of service to the greater community.
One of the complexities relating to Sharia law is that this is interpreted in different ways, by different scholars in different countries, thus creating different rulings about what banking activities and products are halal and what are haram. DiVanna asserts that an Islamic bank or financial institution may be defined as one that is supervised by a Sharia board. (p5)
In addition to his clear explanations, the author provides helpful diagrams and charts that illustrate the different flow of finance and the stages it traverses between conventional banking and Islamic banking.
The book indicates that Islamic banking is functioning in some capacity in over 75 countries and one of the sections deals with global banking and how Muslims are working together. This chapter surveys the diversity across the global spectrum, presents some innovative Islamic banking systems and offers some growth in international benchmarking, to do with such things as mortgages and credit cards. DiVanna points to a myriad of books and Internet resources such as Islam’s online fatwa rulings of what is acceptable Islamic banking practice.
In one of the final chapters that looks to the future of this growth industry, DiVanna states that “Islamic banking is at a crossroad: banks must provide services to Muslims globally while simultaneously interfacing the conventional economics activity between nations.” (p123) More than simply making this assertion, DiVanna draws up an agenda which identifies the major tasks that banks and financial institutions must address.
This book is thorough without assuming a high knowledge about banking practices or terminology. It has a host of footnotes, a glossary and a bulging bibliography.
Understanding Islamic Banking should be required reading for those considering establishing a business in Islamic countries, for anyone who has put money into an Islamic bank and anyone who wants to get that money out and seek the bank’s help in undertaking a major purchase.
Joseph A. DiVanna, Understanding Islamic Banking: The Value Proposition that Transcends Cultures (Cambridge, U.K.: Leonardo and Francis Press, 2006) This book is available from Magrudy’s Bookshops in the UAE at a cost of Dh 140.00.
Image: Front cover of Understanding Islamic Banking; author Joseph A DiVanna.