My decision to switch sides came as a shock to my colleagues and friends in the conventional banking sector of Dubai. They tried their best to convince me to stay put and drop the idea of going to an industry which was miniscule at the time and about which I had no idea of how it operates.
However, what I did not share with my friends is that for a considerable time I had been closely watching the surge of Islamic banking in the Gulf region and around the world. The year-on-year impressive growth rate of Islamic banking compared to its conventional counterpart clearly conveyed its rising worldwide acceptability and growing demand.
The growth influenced me to study the concepts, principles and modus operandi of the Islamic financial system. After close analysis, I found it captivating in that the focus remains on full disclosure, equality of treatment, fair sharing of risks besides partaking in profit or loss in an investment-based transaction and accommodating genuine delays in sales transactions. In addition, by default there is emphasis on charitable causes and social service by way of taking out annual Zakat (obligatory charity) and providing Qard Hasan (interest-free benevolent loans to the needy).
The aspect which fascinated me the most at the time was that the principles of Islamic financial transactions are firmly set and cannot be altered to suit or safeguard anyone’s interest. Moreover, the focus is on the purpose of funding rather than who is being funded.
I could not locate all these noble elements in the conventional financial system I had been practicing and advocating so forcefully for so long. Another thought which came to mind was if the Dubai trader I mentioned earlier had dealt with an Islamic bank, perhaps he would have got a fair deal in the adverse situation he found himself without his fault.
Before I joined Islamic banking, I shared the perception with my conventional banking colleagues that Islamic banking is a smokescreen, simply to satisfy faith-based depositors and entrepreneurs who do not want to indulge in interest-bearing transactions. In fact, some of them claimed that Islamic banking does not hold any future since it lacks commercial viability. Of course, it all proved wrong now that Islamic banking has found a strong foothold in almost every region of the world.
During my initial months of working in the Islamic bank, it dawned on me that there is another stronger corporate governance layer in the system since I was unable to complete a few transactions as a result of my failure to obtain approval from the bank’s Shariah board. The board found these transactions to contain repugnancies to the Shariah parameters. Some of them were really high-profile and large funding deals.
Fruitful experimentation
My learning curve got a boost when within three years of joining Dubai Islamic Bank, I was asked by the bank’s management to start the Shariah Coordination Department in 2004 in order to provide support to the Shariah board to facilitate the faster turnaround of Shariah approvals or decisions to the bank’s matters.
In 2007, the department got converted into an independent company called ‘Dar Al Sharia’ to provide wide ranging Islamic finance consultancy and advisory services to the industry at large. My conventional banking background enabled me to have hands-on experience in developing over four dozen new Shariah compliant Islamic banking products and numerous first-time hybrid structures for Sukuk (Islamic bonds), funds and Takaful (Islamic insurance) products as an alternative to conventional banking and finance products.
When I look back, I feel contented that with my team of lawyers, bankers, scholars and auditors, and with the support from the Shariah scholars of various Islamic financial institutions, I was able to serve the industry with a range of new products to complete the shelf of Islamic financial institutions.
I would like to invite readers to share with me their views and any questions which may arise in their minds while going through my articles and I shall try my best to provide further explanations as and when possible either directly or through my future articles in this space.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions of the Dubai Islamic Economy Development Centre, nor the official policy or position of the government of the UAE or any of its entities. The purpose of this article is not to hurt any religious sentiments either consciously or even unwittingly.
Sohail Zubairi is the projects advisor with the Dubai Islamic Economy Development Centre. He can be contacted at [email protected]