New Delhi : Indian Centre for Islamic Finance-ICIF, New Delhi hails the launching of “Pradhan Mantri Jan Dhan Yojana” by Prime Minister Narendra Modi that aims at eradicating financial untouchability by providing bank accounts to the poor. At the same time ICIF urged Prime Minister to include the option of an alternate interest free finance in the banking sector as recommended by Raghuram Rajan Committee on Financial Sector Reforms -CFSR in 2008.
“Even after forty years of the nationalization of the banks 60% of the people do not have access to formal banking services and only 5.2% of the villages have banks branches.
Marginal farmers, petty traders, landless labours, self employed and unorganized sector enterprise, ethnic minority and women – common man of the country continue to form the financially excluded class.” H Abdur Raqeeb, General Secretary of ICIF said
Sachar Committee, which studied the socio-economic conditions of Muslims in India vis-a-vis other
minority communities have established that a huge section of the Muslim population has been left out of the ambit of banking services for various reasons.
Report of the Committee on Financial Sector Reforms -CFSR headed by Dr Raghuram Rajan which is considered the most comprehensive report of its kind so far, submitted to the Government of India in 2008 ( Raghuram Rajan, former chief economist of the International Monetary Fund (IMF), and presently Governor Reserve Bank of India) has observed that “certain faiths prohibit the use of financial instrument that pays interest. The non-availability of interest-free banking products results in some Indians- including those in the economically disadvantaged strata of society- not being able to access banking products and services due to reasons of faith.”
What this actually means is that a vast section of the Muslim population in India simply does not approach banks because no interest-free banking option is available at present and giving or receiving interest is prohibited in Islam. This is reflected in the maiden speech of the Hon’ble PM in the Parliament when he said:
“When I was young, a Muslim man used to repair my cycle, today his son doing same job. Why is this? Need to focus on their development. Why are our Muslim brothers in such a bad situation? We have to focus on their development.”
Recently Justice VR Krishna Iyer as the patron of International Interfaith Dialogue India (IIDI) has submitted a detailed memorandum to Prime Minister Narendra Modi to introduce interest free banking in the country for inclusive growth for all segments of the Indian society
Mr Raqeeb, who is the Convener of the National Committee on Islamic Banking also elaborated and explained that interest free banking is not beneficial for Muslims alone but also for all and he cited the example of Malaysia where 40% customers are from other communities. and in UK it is 20%
Sukuk, an Islamic Finance Product – asset based bond, according to him has emerged as an alternative type of investment world over for infrastructure development and India can also opt for the same. Brazil, one of the BRIC countries has huge investments in various sectors based on Sukuk and PM Modi can take advantage of the same. It should also be noted that Brazil has only a negligible Muslim population.
Savings of millions of NRIs in the Middle East as well as in India are also looking towards Shariah based finance products to invest and participate in the economic activities of the country.
ICIF General Secretary strongly urged Prime Minister to persuade Finance Ministry as well as the Reserve Bank of India to do the needful in this regard for the inclusive growth and infrastructure development of the country with this alternate finance in the banking sector within the Jan Dhan Yojana.