Islamic banking, finance and investment have existed for decades; some respectful financial institutions, which offer competitive products, are available. On the other hand, you will find some ‘bad apples’ which are leading to certain setbacks and pitfalls for the Islamic financial services system. The major reasons are the following:
- Certain institutions do not follow the Islamic regulations. Such non-compliance with the Islamic regulations ranges from totally ignoring them to some violations in certain areas.
- The level of services offered by such institutions is not competitive with the other non-Islamic Institutions.
- The fraud cases which took place in Egypt and Saudi Arabia, in the name of Islamic investment, caused a serious damage to Islamic financial system as a whole, and Islamic finance became synonymous with fraud.
In addition, there are other factors which led to the above mentioned setbacks, which can be summarized as follows:
- Islamic bank employees often lack knowledge and skills needed for Islamic operations.
- In certain institutions, management falls behind their duties in enforcing the right system which complies with Islamic rules.
- Lack of agreed upon system that insures day to day operations, and how the system makes use of financial instruments and financial products.
- Usually employees are recruited from other non-Islamic financial institutions, thus they lack acquaintance with Islamic financial system rules.
- Having few Islamic Institutions in the market permits these institutions to get away with sub-optimal service, simply because they constitute a monopoly in countries where Muslims represent a majority of the population.
How to overcome the pitfalls and improve the image for Muslim Investors?
- Offer training courses on Islamic Sharia principles for the current employees and for future recruited employees
- The current employee attitude “I don’t care” needs to be changed into customer oriented service. In addition, employees need heavy training on how the non-Islamic institutions render their financial services.
- The Islamic legislator or advisory board must support the availability of “Islamic banking and finance” studies at the college level, so Business Administration graduates with emphasis on Islamic banking, finance or investment may be recruited to serve Islamic institutions.
It is possible to design and offer -upon request- short training courses for bank employees on Islamic banking operation and other alternatives of financing, compatible with Islamic Economic System. Such courses can be a part of an extension program, where courses can be offered during the evening hours. Such arrangements will be very suitable for adults who are fully occupied during regular working hours.