Islamic Finance

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KINGDOM OF SAUDI ARABIA
Ministry of Higher Education KING ABDULAZIZ UNIVERSITY
Islamic Economics Research Centre

ISLAMIC FINANCIAL INSTITUTIONS OF INDIA PROGRESS, PROBLEMS AND PROSPECTS

Mohammad Ghous Ikhtiyaruddin Bagsiraj

Scientific Publishing Centre King Abdulaziz University Jeddah, Saudi Arabia

ISLAMIC FINANCIAL INSTITUTIONS OF INDIA PROGRESS, PROBLEMS AND PROSPECTS Mohammad Ghous Ikhtiyaruddin Bagsiraj

Scientific Publishing Centre King Abdulaziz University P.O. Box 1540, Jeddah 21441 Saudi Arabia

FOREWORD
The Islamic financial services industry has come of age. According to one estimate there are presently over two hundred Islamic banks and financial institutions all over the globe with total transactions valued at over 120 billion US dollars. A cursory look at these financial institutions and the nature of their operations reveals an interesting aspect of the growth of this sector. There does not seem to be much of a correlation between the number of Islamic financial institutions established in a given region with the size of the market that these institutions can potentially serve. For example, countries like Indonesia and India which together account for over one-third of world Muslim population do not score very high in terms of growth of the Islamic financial services industry. This may be due to a variety of reasons, which are often not rooted in economics. India with a population of over 150 million Muslims particularly lags behind with a near-total absence of organized Islamic banks and financial institutions. As such, the situation merits serious attention of researchers and scholars. The present study by Dr. Mohammad Ghous Ikhtiyaruddin Bagsiraj is an ambitious attempt in this direction. Notwithstanding the scant attention that Islamic banking has received from regulators and policy makers in India, small Muslim communities have taken initiative to establish a fairly large number of tiny and small institutions, often in the cooperative, informal and unorganized sector to serve local needs. The challenges confronting these institutions are many, further compounded by the absence of an appropriate legal and regulatory framework. Dr. Bagsiraj’s study undertakes a complete survey of these institutions that dot the map of India, concentrated in Muslim-populated regions. It provides very useful data and insight into the functioning of such community-initiated institutions. It evaluates their socio-economic performance and identifies their problems and prospects. The Center is pleased to publish this study that would help focus the attention of global Islamic financial community on the great potential that India offers in terms of growth of Islamic banking and finance.

Dr Muhammad Najeeb Ghazali Khayat Director Islamic Economics Research Center.

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ISLAMIC FINANCIAL INSTITUTIONS OF INDIA: PROGRESS, PROBLEMS AND PROSPECTS ACKNOWLEDGEMENTS
I am thankful to Almighty for giving me opportunity to complete this study. It was during a visit to Dr. M.N. Siddiqi at King AbdulAziz University after performing Haj in 1996 that I had conceived this research project. I am thankful to Dr. M.N. Siddiqi for his persistent encouragement during the completion of this project. I am most thankful to King AbdulAziz University’s Islamic Economics Research Centre for the sponsorship of this research Project. I am also thankful to the office bearers and staff of various Islamic Financial Institutions of India who have provided me data and information particularly Mr. I.H. Zaki, promoter and chief executive of Muslim Fund Najibabad and Al-Najib Milli Mutual Benefits Ltd. I am also thankful to all the respondents of the “Awareness Survey” conducted in 25 Indian cities. I am very much thankful to IDB’s IRTI for inviting me as visiting scholar to their esteemed institution and honouring me with the opportunity of discussing my project with scholars like Dr. M. Umer Chapra, Dr. Mabid Ali Al-Jarhi, Dr. M. Fahim...
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