Islamic is a word that some associate with Arab culture and some even consider outdated . perhaps Islamic banking gave the same kind of impression when it was first established . Nevertheless, in Muslim countries , this banking system opens up news hopes for better future for Muslim whereby profits are made in a way that is halal and each investment activity is considered an Ibadah. The concept of Muamalat was already existence at the time of the Prophet Muhammad ( S.A.W).But Islamic banking has evolved through the years.
Still one cannot deny that multitude of discrepancies in Islamic banking . But there is some than meets the eyes. Technology is expected to clear the air in this case and improve Islamic banking as a whole. Nevertheless incorporating most advanced technology is also another headache on its own due to many reasons including issues with Shariah standards adapting conventional banking , formulate into Islamic banking , relying on the readily available individual contracts and projecting transparency in the banking system.
Importance of Technology in Islamic Banking
Technology is pertinent in Islamic banking for recording official transactions , calculating profits , addressing financial disparities, computerizing banking activities and improving speed of service provided. Technology is also used of automate all banking transition while linking the front office with back office operations just as in conventional banking.
Technology used in Islamic banking is similar that used in conventional banking. This technology includes ATM stations . Internet banking, credit and debits cards , among others . These tools are there to meet the demand of the rapidly growing number of clients . Furthermore in-bank technologies also needed to ensure fast verification , approval and process.
In this case the value of Islamic banking is not appreciated due to routines similar to conventional banking. Thus , technology must be used to create awareness among potential and existing clients . A complete show how in the form of video clip or slide presentation should be presented right at the entrance to increase customer knowledge of Islamic banking.
CURRENT STATUS ISLAMIC BANKING
Islamic banking is gaining popularity as seen in the 10 % annual growth in the number of Islamic banking. More than 200 Islamic banks manage finances approximately at USD 300 billions . The number of non Muslim customers has also increased. As Islamic banks continue to show remarkable progress, the Western attitudes towards Islamic banking has also changed to the positive.
THE STATUS OF TECHNOLOGY IN ISLAMIC BANKING
Current Islamic banking technology somehow fails to reveal the Islamic features of the Islamic banking system. Studies show that the customer who deposit their money in Islamic banks do it for the sake of its reputation more than for religious reasons. Even in Muslims client cannot be differentiate between the benefits of Islamic banking as compared to conventional banking. The reputation of Islamic banking exceeds its level of technology due to the use of terms” Islamic” and familiar notion that is low risk , safe and resilient.
The technology in Islamic Banking is lacks of transparency and consistency due to many unresolved issues such as standardization of Shariah and contract issuance . The demand for a better system and modification of the urgent system are desperately needed . Islamic banking is at the losing end when compared to conventional banking that has long established in advanced technological software.
The drawback of having to function mostly via agreement and contracts signed between the banks and client is that the technology is not available formula : thus the implementation of technology to substitute the contracts is not possible.
THE UPSIDE OF ISLAMIC BANKING AND ITS CONSERVATIVE TECHNOLOGY
One would describe Islamic banking as gentle banking , safe , secure and low risk which provides comfort despite its simple technology. This safety feature has gained its tremendously popularity and confidence among clients . Many optimism about this banking system because they can see its potential compared to the flaws in the conventional modern technology increases the like hood of addressing their Islamic ethical values.
OBSTACLES IN IMPLEMENTATION OF NEW TECHNOLOGY
Implementation of new Technology remains an obstruction due to the availability of Sharia standard adapting conventions banking formulae into Islamic banking , relying on the readily applying individual contracts and projecting transparency in the banking systems.
On prominent issue in this section is the adaption of conventional calculations and formulae into Islamic banking . Cost will be the banks biggest concern as it is expensive to hire the entire team of expert to create the algorithm from scratch. Therefore , Islamic banks take a different path by having software experts within banks itself. Nevertheless , this never a walk in the park because another Shariah expert is needed , which is even harder to come by. A different solution would be to pay the service provider to solve the technical glitches or it if the price fits , revamps the whole system
Another major obstacle is compliance and this differs from the country to country and Islamic banking depend highly on the interpretation of sharia . As the whole world moves , everything is becoming more complex and the old basic rules cannot be applied as precisely any more.
The interpretation of advisor is the answer to most discrepancies . In most cases , there is variation in guidance of Shariah advisor and their interpretation of how customers can gain access to banking products .With divergent interpretations of there laws developing a system that facilities the offering of particular products to customers may be quite difficult. As such the lack of standards that clearly define a truly Sharia compliant banking system is a great challenge in the implementation of such systems.
FUTURE OF TECHNOLOGY IN ISLAMIC BANKING
Conventional banking solutions provider modify tradition software into Islamic Banking by incorporating non interest principles in their formulae. Although this option requires much larger investments for Islamic banks , it is still a good alternative to developing their own software .
In order to utilize the benefits of advanced technological systems , Islamic banks need to resolve the common prime issue Shariah Standards and contract and agreements. The next step would be the development of suitable software according to the finalized standard.