Unequal and exploitative economic relationship between rich and poor countries is one of the reasons that made African economies redundant and poor. Since they attained their independence, African countries have always depended on western mode of economy which has always exploited and dwarfed them. For instance, many African governments depend of loans from rich countries. These loans have always been offered after strings were attached on them. One of the major blows that make African economies dependent is the whole issues of high interest rates.
Apart from imposing high interest rates on the loans African countries secure from rich countries and International Financial Institutions (IFI), conditions on how to spend the loaned monies, are hard and exploitative. Take for instance; the conditions the World Bank (WB) and International Monetary Fund (IMF) levy on loaning countries. These conditions are always changing to favour rich countries. In this piece we’ll briefly examine how Islamic Banking System may help African countries to do away from exploitation by IFIs.
Under Islamic Banking System, no interest rates (riba) are required to be paid at all. If anything, multinationals corporate and other international financials have kept the economies of poor countries in doldrums simply because they offer them conditional loans whose interest rates are exorbitantly higher. Such countries can do away from such exploitation by taking interest-free loans from Islamic banks all over the world.
If developed economies do somewhat depend and take loans and trade with Islamic Financial Institutions why not us? If poor countries would take long term loans from Islamic Banking Institutions chances are that their economies are likely to get a reprieve. Again, why have African countries become adamant of taking such helpful loans? Is it because there’re no kickbacks involved or just sheer ignorance and fear?
Islamic doctrine of trading is based on moral philosophy that regards riba as an evil thing. One academic once wrote, “Credit is a Human Right, the best of People are those who are most Beneficent to others, we should not rent money and we should not do business with socially irresponsible activities and entities (e.g. liquor Stores, unfair businesses, pornography, polluters and the like.).”
He goes on, “Making money on money without investing in a tangible asset may border on speculation and gambling. Money is a measuring device, it is a thing. The use of money cannot be rented.” Are our countries afraid of taking loans from Islamic Institutions because of being irresponsible in running the business of their countries? I wonder. Why Kenya, for instance, would take loans of billions of dollars from China to build a railway instead of taking it from Islamic Financial Institutions. If responsibility and morality are the conditions Islamic Banking Institutions offer, indeed, they're reasonable conditions to be met.
There are counterparts in almost all forms of Islamic banking in Western banking. If anything, Islamic banking is verily, pushing the envelope as far as modern economics is concerned. IMF and WB have always exploited poor economies by levying many conditions on them pointlessly. They destroy the economies of poor countries under the pretext of helping them. Once things go awry, the same institutions blame poor countries while their conditions are the very cause of the failure.
Beware. While African countries are sweating about whether to take such safe money and do business, rich countries have nary bothered to worry. If you ask how Dubai was built and who built you’ll be told it is western companies. America doesn't worry to do business with Saudi Arabia. Why should we? To me, Islamic banking is safer and more reliable than Chinese cash offered easily without those receiving looking at strings attached to it especially high rates and long term impacts on their economies.
When Asian migrants took advantage of Islamic banking and prospered the US Today had this to say, “Islamic finance is booming worldwide, fueled by the windfall from sky-high oil prices and a return to a more strict interpretation of the holy Koran across the Islamic world.”
People or countries shouldn't be afraid of Islamic banking system especially interest-free loans. They’re likely to fear the conditions that the said money shouldn't be employed in things like alcohol gambling and charging interests. Again, there is another way of making profits out of such interest free loans as US Today says, “For instance, the German state of Saxony-Anhalt, which issued the first Islamic bond in 2004, sold government property to bond investors and then leased it back from them. The investors technically earned money from the rent, not interest.” This is obvious, especially, for mortgage. If, for instance, the country takes a loan from Islamic banks and builds a university or a hospital, it will make more money without breaking Islamic law, and it will benefit both sides namely the bank loaning and the country taking the loan.
Furthermore, there are top Islamic banks in America which contribute to the economy of the US. These are LARIBA- The American Islamic Finance House, University Bank, Harvard Islamic Finance Program, Guidance Financial Group, and samba. Do we have the same in Africa? Nope! Why?
Islamic financial institutions ‘contribution to the world economy can’t be gainsaid. In 2008 Islamic Financial Institution s had a humongous amount of money in assets as expressed, “Total assets of Islamic banks worldwide are estimated at about $250 billion, and are expected to grow by about 15 percent a year,” (Choong and Liu, 2006; Ainley and others, 2007). The figure skyrocketed within no time as observed, “It is estimated that the size of the Islamic banking industry at the global level was close to US$820 billion at end-2008,” (IFSB et al, 2010).
Suffice it to say that African countries have a future in Islamic Banking system. Thus, we need to change and take advantage of this economic friendly system.
Source: Business Times Friday, 11 July 2014 08:39.
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