The development plan of Prime Minister ” Narendra Modi” reflected in his slogan ” Sabka Saath , Sabka Vikas” i.e together with all development for all ” is a great vision . Make no mistake, this is not an observation scripted domestically within India by a political analyst or admirer of India ‘s top men. On the contrary, none other than former US secretary of State John Kerry expressed these views during his visit to India . Keeping our focus on the slogan remind us of something significant – could it be Islamic finance ? Let’s examine and try to find an informed response to this question.
But Before that , let’s try to analyse some unheard milestone that India achieved relation to finance , which are also some of the reasons , which may impress Islamic finance to make its presence felt in India.
In 2008 when governments of most of the developed economies were busy bailing out their home-grown banking and financial institutions, Indian economy which was primarily an emerging market witnessed relatively lower impact to its financial institutions; still managing their expenses and paying taxes to the government It was business as usual and despite the worst, India demonstrated the tensile strength it’s banking and financial services Industry naturally possess.
I) In 2013, when India was facing currency crisis in the form of a weaker rupee vis-a-vis USD, it recovered from it quite promptly. Essentially, India spelled lessons in quick recovery and risk management .
II) In 2014 , India launched is highly ambitious financial inclusion plan, termed as Prime Minister Jan Dhan Yojna which is by far our one of the massive campaign the world may have ever seen.
There is several others instances , which make us believe that India a great destination for sustainable banking and financial services. If india as an economy stands for sustainable banking and financial services , Islamic banking , as as system is no different. A paradox , which we will try to find an answer through this article , is
i) When India focuses on Sabka Saath , Sabkha Vikas , which is very similar to the concept of community banking as advocated By Islamic finance.
11) When India believe in a strong risk management framework in banking system , which is conservative and extra protective on the same line as Sharia screenwriting practiced in Islamic finance.
Despite so many similarities , why is Islamic finance not synonymous with India till date? Are there sufficient reason to believe why Islamic finance and India are mutually exclusive ? Let analyses further . Having completed a reality check let’s go into the world of financial imagination for a moment . Imagine two like-minded entities , one being country called India and other being Islamic banking system join hands and come together , the world could poised to witness something special . Essential , the two may find a lot of common , leading to a wealth of expertise . Increasing and rather unfortunately , as expressed earlier , this remain as unfulfilled dream so far.
A question therefore arises , who is missing what ? If it Islamic finance , or vice visa ? In either situation, the loss is dual and is adequate verifiable . for instance , India has an aspiration to be total financial inclusive nation by 1 Jan 2016 by way of facilitating a bank account for every citizen , 18 years of age and above.
However citizen who take into consideration the moral consequences of transaction may in all like hood prefer to stay away from the financial inclusion agenda , in the absence of the banks, which could promise ethical finance . As a result ,India dream to be financially inclusive nation remains unfulfilled . On the contrary , Islamic finance lack a presence in large nation like India or China and mostly remain confined to specify economics like Malaysia and few countries in the GCC . Had Islamic finance expose itself to the likes of China and India , its story and growth trajectory would have been completely different . Its scale and scope remain marginal in the absence of patronage highly populated nations like India. Consequently neither India nor Islamic finance could benefit from each other so far even though the importance of one is nor hidden from the others. if there are so many examples of win win in this world, the gap that exist between India and Islamic finance is rate example for loss loss scenario.
Having set the context , as to where we stand today , let us examine what didn’t click so far and why it click? From the point of view of India , it hasn’t looked at Islamic finance as a true commercial proposition., and instead it was always observed as an extension of a particular religion. Due to this narrow approach , every time Islamic finance was considered its opposition proved to be much stronger.
As a result , the political will to consider Islamic banking as an alternative financial system in the country which was already very low, plummeted . Islamic finance was never judged on its merit but rather on its perception.
Unfortunately , Islamic finance was seen as a trade off with India ‘s secular constitutional credential. It’s a classic example of poor marketing . Factually , India is the second largest Muslim populated nation of the world , next only to Indonesia.However , penetration of Islamic banking is noway comparable . It is also classic example of extreme demand and zero supply , which is generally not observed in the real world. Fundamental of Economic as a whole seem to fail.
A reality remain , the promotion of Islamic finance in India was linked to and considered responsibility of Ministry of enormity affairs , whereas open minded countries like the UK , choose the move forward in Islamic finance trajectory under the their former leaders like David Cameroon. The large extent proves that previous governments in India haven’t given Islamic finance deserving attention. Having discussed the past and the present , let shift our focus to future . India witnessed in change of governance this year and preferred to listen the music of development as opposed to anything else. Interestingly , development and finance have to close connection; therefore , if India wants to develop in the true sense,it need to create adequate financial resources to support such initiatives.
A better ways to achieve it is diversification of financial resources , which could be achieved at case by introducing Islamic finance and reducing the pressure on conventional finance. It will be additionally create an environment where citizen who do not prefer to bank with conventional financial institutional., may find an alternative , park their assets and an opportunity to move away from physical assets , which otherwise get accumulated in the absence of preferred services. It will also help achieve its financial inclusion agenda rather convincingly . let none reject financial inclusion initiative in India and let us together make it a huge success.The Year 2014 was considered by India a year of hope. It began with election of hope , which gave the country a decisive mandate for governance almost three decade of fractured mandates. In the other words, country of 1.22b illion people thought on the same line and comfortable avoided a weak government.
Development is at the core of new government’s agenda . India went step forward, and so as to make the environment more happening , coined a new acronyms for FDI , as First develop India . Massive programs like ” Make in India ” are already live. Having said that , question that interests Islamic finance enthusiast like us it whether there is anything for them in India ‘s growth story? Could India , make more in India by attracting Sharia compliant business environment? Could India capitalist on its strong relationships with the GCC states and convince it to invest in India by offering Sharia compliant assets?
Islamic finance leaders may want to give a thought on ways to enable Islamic finance in India. Could a packaging exercise such as Socially Responsible Investing (SRI) be implemented as it worked well in certain parts of Europe and possible work for India? It is a test character for Islamic finance leadership globally and India’s top political leadership as well. Will India continue to ignore the proposition owing to its foundation in a particular religion or will it embrace against the odds. Could India afford to miss on its demographic dividend, huge demand and democracy that relates to huge that relates to huge Muslim population , which is waiting for an opportunity to respond.
India should therefore not miss the bus and welcome Islamic finance to participate in its growth story. It may be one key areas though which sustainable growth and development can be achieved that India aspires to achieve. Islamic finance on the other hand should re look at India , and find ways to enter India market. let both India and Islamic finance rise to occasion and create history.