By Danish Ahmad Khan
Muslim community in Australia is making headway towards strengthening the principles of Islamic Banking & Finance in the country. The move is being seen as a credible and viable alternative to the offers currently available in the marketplace. The Muslim Community Cooperative Australia (MCCA) has announced its intention to turn itself into Australia’s first Islamic retail bank.
The MCCA recently held a symposium that was inaugurated by Australia’s Assistant Federal Treasurer Nick Sherry. Speaking on the occasion, Sherry said, “Australia has over 400,000 Muslims. Islamic finance was an area of growing interest in the country. The offering of retail Islamic finance products contributed to fostering social inclusion, by enabling Australian Muslims to access products that may be more consistent with their principles and beliefs as well as widening the choice of products for non-Muslims.” The Government in Canberra has also expressed an interest in the development of Islamic banking as its popularity continues to grow in Australia.
MCCA chairman Dr. Akhtar Kalam outlined the objectives of the MCCA saying that the organization was too big to remain a cooperative and yet too small to become a bank. Kalam said that the move to turn MCCA into Australia’s first Islamic retail bank would be hastened as more and more consumers are now turning to the principles of Islamic Banking & Finance as an alternative to the current offers in the marketplace. Under Islamic law, charging interest on a loan is forbidden.
"I am confident that the Islamic principles of ethical investment and finance will be immensely attractive to Australian Muslims and non Muslims and in doing so, provide the momentum that will ensure MCCA's goal is realized to be our nation's first retail Islamic bank. The MCCA would work with the federal government to address the challenges and find an Islamic Finance and Banking solution," Kalam said.
The MCCA was founded in the early 1990s. It was initially funded by shareholders but now borrows from non-banking lenders. The key achievement of the MCCA being that it has helped hundreds of Muslim families in Australia buy a home.
The symposium was held in early July, and was the largest seminar on Islamic finance that Australia hosted ever. The symposium was attended by more than 200 delegates and speakers from various countries, including the UAE and Saudi Arabia attended. The symposium has been held at a time when the world is in the throes of recession as also the big international banks trying to explore the opportunities that the Shariah system offers to help tide over the crisis. It may be noted that Sharia-compliant banking is a multibillion-dollar worldwide industry, and is commonplace in Indonesia and Malaysia.
Nail Aykan, a key figure of MCCA in Melbourne, addressing the gathering pointed out that the services being provided by the MCCA can help prevent further global economic meltdowns. Aykan believes that an ethical system that eschews the payment of interest in adherence to Islamic principles can help conventional banks steer a more stable and less greedy course.
"There have been many studies done to prove that Islamic banking could have avoided the global financial crisis. The Islamic banks have fared much, much better in this recession. There is a lot that the conventional world is now studying to see how it could do things better or differently to potentially avoid another global crisis," Nail Aykan said and added, "As the Muslim world is rediscovering its faith, people are coming to the realisation that they must make every possible effort to avoid interest and, hence, in the last decade there has been an incredible demand from the Muslim world for an alternative banking model."
Aykan is confident that the MCCA, being in existence for around 18 years, would be able to become the first Islamic bank in Australia – a fully fledged retail bank. Aykan said, "It will be a great opportunity because the demand is so huge. There are 400,000 Muslims living in Australia, which equates to about 80,000 families. It is estimated that around 80 per cent of those families own a home either outright or have a loan, so the market to refinance those conventional mortgages to Sharia-compliant finance is huge. The numbers speak for themselves."
Earlier, Melbourne’s La Trobe University recognized the community’s growing enthusiasm for religiously sensitive banking and set up Australia’s first master’s programme in Islamic finance. Ishaq Bhatti, Associate Professor in La Trobe University, has devised the curriculum for this master’s programme. Bhatti is an expert in both Islamic and conventional economics, accounting, financial management and analysis. The aim of the postgraduate course is to train a generation of thinkers capable of developing and exploiting a fusion of different banking cultures.
Bhatti explains, “Islamic banking is, in fact, ethical banking when people get sick of mortgages and interest rates and so they look for an alternative and Islamic banking can do that. Marrying or integrating conventional finance with Islamic finance would be better for the future of the world’s banking system. It has the potential to absorb such a financial shock that the world is currently facing.”
The capacity of a new banking structure to avoid succumbing to bad debt or toxic loans could depend on the renegotiation of contracts, which gives the Islamic model crucial flexibility, especially when times are hard. “When households are unable to pay their mortgages and businesses are unable to pay their interest in times of crisis, in Islamic finance there is a possibility to renegotiate the terms and conditions of the loan. It takes care of borrowers’ circumstances especially in the financial crisis as the world is currently facing. When a system fails, people start looking for alternatives and Islamic banking has been there for more than three decades. As an alternative system it has a chance to succeed. Obviously it is not at that level where it can make enormous contributions right away, but in the next decade or so Islamic banking practices could contribute to the banking system of the world,” an economics expert said.