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Islamic Society ( 25 March 2015, NewAgeIslam.Com)

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Un-Islamic Clients of Islamic Banks




By Abdulkadir Civan

March 24, 2015

International and national studies indicate that corruption is very common in Turkey.

A social reflection of that issue is the absence of “trust” among fellow members of society. According to the World Values Survey, only 11.6 percent of the Turkish population believes that “most people can be trusted.” Like all great religions, Islam strongly encourages honesty and integrity. Something must then be wrong in Turkey, where the majority of the population claims to be Muslim.

Several months ago I wrote an op-ed piece in Today's Zaman on a related topic. In that column I discussed the controversy about Turkey becoming more Islamic. I argued that Turkey is not becoming more Islamic; on the contrary, the social, economic and political structures of Turkey are very un-Islamic. I backed up my thesis with a study by two scholars. In that study, Dr. Scheherazade S. Rehman and Dr. Hossein Askari first identified fundamental Islamic principles based on primary sources, the Quran and the Hadith. They further used their findings to analyze to what extent countries comply with these principles and ranked them accordingly.

Countries like Iran, Saudi Arabia and Afghanistan are not among the first 50 most-Islamic states. New Zealand, Luxembourg and Ireland are the first three most Islamic states. Of the predominantly Muslim states, Malaysia, ranked 38th in the standings, is the most Islamic state. Turkey is ranked 103rd out of the 208 nations. Islamicity index rankings of countries are surprisingly similar to good governance-based rankings. However, it can be argued that if believers indeed follow the behavioral teachings of Islam, most would be honest, industrious, altruistic and respectful of others. Societies made of these kinds of individuals would be indeed prosperous materially and spiritually.

Rehman and Askari's study confirms my observation that Muslims in Turkey do not really embrace and internalize the teachings of Islam. Even if they subscribe to the theological beliefs and engage in worship, they are not following the behavioral patterns of true Muslims. Last week I came across another study on a related topic. Turkish economist Selva Demiralp of Koç University and Turkish political scientist Seda Demiralp of Işık University study the economic behavior of clients of Islamic banks in Turkey. According to the mainstream view, “interest” is forbidden in Islam. Neither lending nor borrowing with interest is allowed in traditional Islam. Although there were and still are controversies about the boundaries of that ban, most devout Muslims consider dealing with any kind of interest based instrument as against the wishes of God.

To satisfy the banking needs and demands of those devout Muslims, there is a small but thriving Islamic banking industry in Turkey. The clients of these banks are considered to be more devout than regular citizens of Turkey. Demiralp and Demiralp studied the reactions of those to the interest hikes brought on by the unexpected changes in monetary policy. Since interest earnings are forbidden according to the teachings observed by these devout Muslims, the impact of the interest rate hikes would be smaller than for traditional bank clients.

However, they react almost identically to the interest rate increases. It seems that if the interest payments become significantly more attractive compared to the earnings provided by Islamic banks, the devout clients switch to traditional banks. It is not possible to make a definite judgment since the study does not provide enough detail, but the following statement nicely summarizes their conclusions: “Devout individuals prefer Islamic banks as long as these provide competitive gains, but they may consider alternative investments or economic transactions when they offer superior advantages.”

The authors also conducted surveys with the customers of Islamic banks. According to this survey, 83 percent of these customers stated that they prefer Islamic banks for religious reasons. Similarly, in an interview, a certain Islamic bank manager opposed the conclusions of the authors. He said “devout individuals, their ‘true' customers, would not shift their accounts elsewhere, regardless of the changes in interest rates.” He said those shifting to traditional banks represent only a small minority of their customers. Mehmet Saraç of Sakarya University made a similar study. According to the study, only 25 percent of businessmen who claim to be conservative exclusively use Islamic banks, while 45 percent of these “conservative businessmen” exclusively use traditional banks.

It appears that even the most devout Muslims in Turkish society do not internalize the teachings of their faith. As it becomes materially costly to stick to these teachings, they easily switch to alternatives. Obviously, as a requirement of human psychology they find many legitimizing reasons for the changes in their behavior. Nobody admits that they are bad Muslims or bad human beings.